F-4/A











Exhibit 10.19  



SERIES BB PREFERRED
SHARE PURCHASE AGREEMENT 



This Preferred Share Purchase
Agreement (this “Agreement”) is entered into as of the 22nd
day of March, 2006 by and between Negevtech Ltd. (hereinafter the
“Company”) and a company formed under the laws of the State of Israel,
the investors identified in Schedule A attached hereto (hereinafter each an “Investor” and collectively the
“Investors”). 



WITNESSETH 



WHEREAS the Company is engaged
in the research and development, manufacturing and marketing of a certain innovative
system (the “System”); and 



WHEREAS the Investors desire
to purchase shares in the Company and the Company desires to sell and issue shares in the
Company pursuant to the terms and conditions set forth in this Agreement. 



NOW THEREFORE, in
consideration of the covenants and promises set forth herein, the parties hereto agree as
follows: 



	1.  	Purchase
and Sale of Shares  






	1.1  	Sale
and Issuance of Shares by the Company  






	 	(a) 	Subject
to the terms and conditions of this Agreement, at the Closing (as                defined
below) the Investors shall purchase, severally and not jointly, and the
               Company shall sell and issue to the Investors, severally and not jointly,
an                aggregate amount of 4,742,606 (Four Million Seven Hundred and Forty Two
Thousand                Six Hundred and Six) Series BB-3 Preferred Shares of the Company,
par value NIS                0.01 each (“Issued  Shares”), at US$2.3194
per share (the                “Price Per Share”) for an aggregate
investment of US$11,000,000                (Eleven Million United States Dollars) (the
“Purchase Price”)                convertible into Ordinary Shares of the
Company, par value NIS 0.01                (“Ordinary  Shares”), to be
allocated among the Investors as                set forth in Schedule A.
Ordinary Shares issuable upon the                conversion of the Issued Shares shall be
referred to herein as                “Conversion Shares”. 






	 	(b) 	The
Preferred BB-3 Price Per Share is based on a pre-money Company valuation of
               $85,504,200 (Eighty Five Million Five Hundred and Four Thousand Two
Hundred US                Dollars) on a fully diluted basis, including: (i) all
outstanding shares                (including also Ordinary Shares issuable upon
conversion of Ordinary-Preferred                Shares), (ii) all shares, on an
as-converted basis, resulting from any                anti-dilution protection afforded
to any of the existing shareholders of the                Company triggered by the
investment hereunder, (iii) 4,907,003 Ordinary Shares                of the Company
reserved under all of the Company’s incentive share option                plans (the
“Share Option Plans”) for issuance of options to
               employees and consultants (such number not including 197,500 Ordinary
Shares                issued upon exercise of options granted to employees of the
Company), (iv)                120,560 Ordinary Shares reserved for issuance to service
providers of the                Company, (v) 751,400 Series BB-1 Preferred Shares held by
Genesis Partners II,                L.D.C. and 110,892 Series BB-1 Preferred Shares held
by Genesis Partners II                (Israel), L.P. that will be converted into the same
number of Series BB-3                Preferred Shares at the Closing, and (vi) all other
warrants, options and                convertible rights, including convertible notes and
loans; but specifically                excluding 925,000 additional Ordinary Shares to be
reserved under the Share                Option Plans subject to and immediately following
the Closing (as defined                below). 















	1.2  	The
rights, preferences and privileges of the Issued Shares are as set forth in the Amended
Articles of Association of the Company attached hereto as Exhibit A (hereinafter
referred to as the “Amended Articles”) and in the Shareholders Rights
Agreement as amended upon the Closing, pursuant to the Amendment attached hereto as Exhibit
B (hereinafter referred to as the “Shareholders Rights Agreement”).






	1.3  	Closing.






	 	
The
closing of the purchase and sale of the Issued Shares to the Investors (the “Closing”)
shall take place on March __, 2006 or at such other time and place as may be
agreed upon orally or in writing by the Company and the Investors investing 85% of the
Purchase Price (the “Majority Investors”). At the Closing, the following
transactions shall occur simultaneously (no transaction shall be deemed to have been
completed or any document delivered until all such transactions have been completed and
all required documents delivered):  






	 	(a) 	the
Company shall deliver to the Investors (unless waived by the Majority
          Investors): 






	 	(i) 	copies
of resolutions of the Company’s shareholders, in the form attached           hereto
as Schedule 1.4(a)(i), by which, inter alia: (i) the
          Articles of Association of the Company were replaced by the Amended Articles;
          (ii) the authorized share capital of the Company was increased; and (iii) to
the           extent required, this Agreement and all ancillary documents thereto were
          approved, together with a duly completed notices of such changes to the Israeli
          Registrar of Companies;  






	 	(ii) 	validly
executed share certificates covering the Issued Shares issued in the           name of
each Investor, in the form attached hereto as Schedule 1.4(a)(ii); 






	 	(iii) 	a
copy of a resolution of the Company’s Board of Directors, inter alia: (i)
               approving the execution, delivery and performance of this Agreement and
the                ancillary documents thereto, (ii) issuing and allotting the Issued
Shares, and                (iii) reserving an additional 925,000 Ordinary Shares for the
Share Option Plans                subject to and immediately following the Closing for
the purposes of granting                options to purchase Ordinary Shares of the
Company to employees and consultants                of the Company and/or Subsidiary
thereof, such that the aggregate reservation                immediately following Closing
(including the 197,500 Ordinary Shares issued upon                exercise of options
granted to employees of the Company) shall be 14.18% of the                fully diluted
share capital of the Company; all in the form attached hereto as Schedule
1.4(a)(iii); 






	 	(iv) 	a
copy of the Company’s share register registering the Issued Shares in           the
Investors’ names in the form attached hereto as Schedule           1.4(a)(iv);  






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	 	(v) 	a
copy of the notice to be provided to the Israeli Registrar of Companies
          immediately after the Closing (provided that all Investors who are not (i)
          Israeli residents or (ii) registered as of the Closing with the Registrar of
          Companies as shareholders of the Company, have provided the Company with such
          documents and information as are reasonably necessary to file and register such
          issuance of shares), in the form attached hereto as Schedule
          1.4(a)(v).  






	 	(vi) 	a
copy of the approvals of the transactions contemplated hereby from: (i) the
          Office of the Chief Scientist of the Ministry of Industry and Trade of the
State           of Israel (‘OCS’); and (ii) the Investment Center.  






	 	(b) 	The
Company shall notify the Israeli Registrar of Companies of the issuance of
               the Issued Shares promptly after the Closing and shall deliver a copy of
such                notice to the Investors’ counsel. 






	 	(c) 	Payments
shall be made by the Investors to the Company in U.S. dollars of the
               Purchase Price by way of a bank transfer to the Company’s account
(Bank                Leumi Le’Israel BM, Rehovot Business Branch (978), account No.
222200/29),                or by such other form of payment as is mutually agreed by the
Company and each                Investor. 






	 	(d) 	The
non-Israeli Investors shall deliver to the Company a duly executed
               undertaking to the OCS in the form substantially attached hereto as Schedule
1.4(d), to the extent required by the OCS and if                they have
not already delivered such undertaking in the past. 






	2.  	Representations
and Warranties of the Company  






The Company hereby represents and
warrant to the Investors that, except as set forth in this Agreement, the Exhibits and
Schedules hereto and the Schedule of Exceptions attached hereto, which exceptions
shall be deemed to be representations and warranties as if made hereunder, the following
representations are true and correct on the date of this Agreement and shall be true and
correct on the date of Closing as if made on such date: 



	2.1  	Organization,
Good Standing and Qualification. 






The Company is a private company duly
organized and validly existing under the laws of the State of Israel and incorporated on
December 22, 1991. The Company has all requisite corporate power and authority to carry on
its business as now conducted and as proposed to be conducted in: (i) the Work Plan
attached hereto as Schedule 2.1; (ii) the Marketing Penetration Plan
(as defined below); and (iii) the 2006 Annual Budget (subsections (i), (ii) and (iii) are
collectively referred to herein as the “Updated Work Plan”). The Company
is duly qualified to transact business in each jurisdiction in which the failure so to
qualify is reasonably likely to have a material adverse effect on its assets, financial
condition, operating results, prospects or business of the Company as presently conducted
and as proposed to be conducted in the Updated Work Plan (“Material Adverse
Effect”). The Memorandum of Association and Articles of Association of the
Company, all as currently in effect, are attached hereto as Schedule
2.1(a). 



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	2.2  	Capitalization
and Voting Rights.  






Immediately prior to Closing (and
prior to the creation of the Series BB-3 Preferred Shares and the conversion of the Series
BB-1 Preferred Shares held by Genesis entities described in Section 1.1(b)(v) above), the
authorized capital of the Company consists of NIS 755,700 divided into (i) 42,000,996
Ordinary Shares, of which 428,949 Ordinary Shares are issued and outstanding and of which
4,907,003 are reserved for issuance to employees, consultants, officers, or directors of
the Company and/or subsidiary thereof pursuant to the Share Option Plans (such number not
including 197,500 Ordinary Shares issued upon exercise of options granted to employees of
the Company), of which 4,313,226 have been allocated and the remaining 913,777 are
available for future issuance, (ii) 1,569,004 Ordinary-Preferred Shares of which all are
issued and outstanding, (iii) 15,000,000 Preferred AA Shares, par value NIS 0.01, of which
13,144,070 are issued and outstanding, (iv) 13,000,000 Preferred BB-1 Shares, par value
NIS 0.01, 9,014,548 of which are issued and outstanding and (v) 4,000,000 Preferred BB-2
Shares, par value NIS 0.01, 3,597,106 of which are issued and outstanding. 



The outstanding Ordinary Shares,
Ordinary-Preferred Shares, Series AA Preferred Shares, Series BB-1 Preferred Shares and
Series BB-2 Preferred Shares, are all duly and validly authorized and issued, fully paid
and nonassessable, were issued free of any lien, pledge, claim, charge, encumbrance or
third party rights of any kind (“Security Interest”), and were issued in
compliance with all applicable laws, including the relevant securities laws of the State
of Israel. 



A complete and correct list of the
security holders of the Company (including, all warrants and options of the Company’s
capital stock) immediately prior to the Closing is set forth in Schedule
2.2 attached hereto. The individuals and entities identified in
Schedule 2.2 as the shareholders of the Company immediately prior to
the Closing are the registered owners, and to the Company’s best knowledge, the
lawful owners, beneficially and of record, of all of the issued and outstanding share
capital of the Company, free and clear of any Security Interest, restrictions, rights,
options to purchase, proxies, voting trust and other voting agreements, calls or
commitments of every kind, and none of the said individuals owns any other shares, options
or other rights to subscribe for, purchase or acquire any capital stock of the Company. 



Immediately following the Closing the
correct list of the shareholdings (including all warrants and options) of the
Company’s share capital will be as set forth in Schedule 2.2(a). 



Except for (i) the options, warrants
and rights detailed in Schedule 2.2, (ii) the Issued
Shares to be issued under this Agreement and the conversion privileges of such Issued
Shares, (iii) the rights provided in Sections 2, 3 & 4 of the Shareholders Rights
Agreement, (iv) rights pursuant to the Company’s Articles of Association and (v) the
agreed increase in the number of shares reserved under the Share Option Plans by an
additional 925,000 Ordinary Shares subject to and immediately following the Closing, there
are no outstanding or authorized subscriptions, options, warrants, calls, rights
(including conversion or preemptive rights), commitments, anti-dilution rights, exchange
rights, or other rights or securities, of any nature whatsoever, or any other agreements,
undertakings, promises or commitments of any character for the purchase of or acquisition
from the Company of any shares of its capital stock or any security convertible into, or
exchangeable for, or evidencing the right to subscribe for, any shares. 



The Company is not a party or subject
to any agreement or understanding, and, to the best of the Company’s knowledge, there
is no agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security or by a
director of the Company. 



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	2.3  	Officers
and Directors.  






	 	(a) 	The
Company and the Subsidiary’s current officers and directors are the
               individuals appearing in Schedule 2.3 hereto. Except
as set                forth in the Company’s Articles of Association and the
Shareholders Rights                Agreement, the Company has no agreement, obligation or
commitment with respect                to the election of any individual or individuals
to the Company’s Board of                Directors. To the Company’s best
knowledge, there is no voting agreement or                other arrangement among the
Company’s shareholders, and there is no                agreement or understanding
between any persons and/or entities, which affects or                relates to the
voting or giving written consents with respect to any security or                by a
director and/or officer of the Company. 






	 	(b) 	There
are no agreements, commitments and understandings, whether written or
               oral, with respect to any compensation to be provided by the Company or
the                Subsidiary to any of their directors or officers except as set forth
in the Schedule of Exceptions  copies of which have been provided
               to Wellington. 






	2.4  	Subsidiaries.  






The Company owns, beneficially and of
record, all of the issued and outstanding share capital of Negevtech Inc., a Delaware
corporation, and Singapore PTE Ltd., a Singapore corporation, (jointly, the
“Subsidiary”) and all the rights thereto, free and clear of liens,
claims, charges, encumbrances, restrictions, rights, options to purchase, proxies, voting
trust or other voting agreements. Except for the Subsidiary, the Company does not own any
of the issued and outstanding share capital of any other company, and is not a participant
in any partnership, joint venture or other business association. There are no other share
capital, preemptive rights, convertible securities, outstanding warrants, options or other
rights to subscribe for, purchase or acquire from any Subsidiary or from the Company, any
share capital of such Subsidiary and there are no contracts or binding commitments
providing for the issuance of, or the granting of rights to acquire, any share capital of
any Subsidiary. All issued and outstanding share capital of the Subsidiary was duly
authorized, and is validly issued and outstanding and fully paid and nonassessable. The
Subsidiary is duly organized, validly existing and in good standing under the laws under
which it is incorporated and has full corporate power and authority to own, lease and
operate its properties and assets and to conduct its business as now being conducted and
as proposed to be conducted. Neither the nature of any Subsidiary’s business as now
conducted or as presently proposed to be conducted nor its ownership or leasing of
property require that such Subsidiary be qualified to do business or be in good standing
in any jurisdiction other than the jurisdiction in which such Subsidiary is organized. 



	2.5  	Authorization
and Approvals.  






	 	(a) 	The
Company has all requisite corporate power and authority to execute and
               deliver this Agreement and any other agreements contemplated hereby or
which are                ancillary hereto and to consummate the transactions contemplated
hereby and                thereby. All corporate action on the part of the Company and
its officers,                directors and shareholders necessary for the authorization,
execution and                delivery of this Agreement and any other agreements
contemplated hereby or which                are ancillary hereto, the performance of all
obligations of the Company                hereunder and the authorization, issuance and
delivery of the Issued Shares, has                been taken or will be taken prior to
the Closing, and this Agreement, any other                agreements contemplated hereby
or which are ancillary hereto and any obligations                contemplated herein
constitute valid and legally binding obligations of the                Company,
enforceable in accordance with its terms subject only to laws affecting
               the rights and remedies of creditors. 






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	 	(b) 	Except
for OCS approval, the Investment Center approval, and the notice to be
               provided to the Israeli Registrar of Companies with respect to the
adoption of                the Amended Articles, the amendment of the Company’s
Memorandum of                Association, the increase and change in the composition of
its share capital and                the allocation of the Issued Shares in accordance
with this Agreement, no                approvals, permits or consents of, or filing with
any state or local                governmental body, official authority, or any other
third party is required                under any applicable law or instrument in
connection with the execution and                delivery of this Agreement or the
consummation of the transactions contemplated                hereby. 






	2.6  	Valid
Issuance of Issued Shares.  






The Issued Shares to be issued to
each Investor pursuant to this Agreement shall, when issued as provided for herein, be
duly authorized, validly issued, and issued in compliance with all applicable laws,
including Israeli securities laws and free of any pre-emptive rights or similar rights
(“Participation Rights”) and any restrictions on transfer, will have the
rights, preferences, privileges, and restrictions set forth in the Shareholders Rights
Agreement and the Amended Articles (as shall be in force from time to time), and will be
free and clear of any taxes, liens, claims, encumbrances or third party rights of any kind
(except as specified in this Agreement, the Amended Articles, the Shareholders Rights
Agreement and applicable law) and duly registered in the Investor’s name in the
Company’s share register and, once fully paid for by such Investor as provided for
herein, shall be fully paid and non-assessable. The Conversion Shares have been duly
authorized and reserved for issuance by all necessary corporate action and, when issued
and allotted in accordance with the terms of this Agreement and the Company’s
Articles of Association, will be duly and validly issued, will have the rights,
preferences, privileges and restrictions set forth in the Company’s Articles of
Association (as shall be in force from time to time) and will be free and clear of any
liens, encumbrances, claims, or third party rights of any kind (except as specified in
this Agreement, the Amended Articles, the Shareholders Rights Agreement, and applicable
law) and duly registered in the Investor’s name in the Company’s share register
and, once fully paid for by such Investor as provided for herein, shall be fully paid and
non assessable. 



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	2.7  	Litigation.  






There is no claim, action, suit,
proceeding or, to the best knowledge, information or belief of the Company, investigation
pending or currently threatened against the Company, the Subsidiary, and/or any of Gadi
Neumann and David Alumot (collectively, the “Founders”) in their capacity
as shareholders or directors of the Company, and there is no claim, action, suit,
proceeding or, to the best knowledge, information or belief of the Company, investigation
which questions the validity of this Agreement , the Shareholders Rights Agreement, or the
right of any of them to enter into it, or to consummate the transactions contemplated
hereby, or which is reasonably likely to result, either individually or in the aggregate,
in any Material Adverse Effect or any change in the current equity ownership of the
Company, nor, to the best knowledge, information or belief of the Company, is there any
basis for such claim, action, suit, proceeding or investigation. The foregoing includes,
without limitation: (i) actions pending or threatened involving the prior employment of
any of the Company’s or the Subsidiary’s employees, including without
limitation, the previous employment of the Founders with Orbot Instruments Ltd.
(“Orbot”) and the previous employment of David Alumot with Opal
Technologies Ltd. (“Opal”) and/or with Applied Materials Israel Ltd.
(“Applied Materials”); (ii) use by employees of the Company or the
Subsidiary, in connection with the business of the Company, of any information or
techniques allegedly proprietary to any of their former employers, including without
limitation, Orbot, Opal and Applied Materials, or their obligations under any agreements
with any such prior employers, and (iii) any actions pending or threatened by Orbot and/or
Opal and/or Applied Materials. Neither the Company nor the Subsidiary is a party to, or
subject to the provisions of any order, writ, injunction, judgment or decree of any court
or government agency or instrumentality nor are any of them aware of any pending or
threatened action, suit, proceeding or investigation (or of any basis for same) against
any of them by any government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company, the Subsidiary and/or by the Founders
currently pending or that the Company, the Subsidiary and/or the Founders intends to
initiate. 





	2.8  	Proprietary
Information; Patents and Trademarks. 






	 	(a) 	The
Company and the Subsidiary own or have the right to use pursuant to written
               license, sublicense, agreement, or permission, free and clear of any
Security                Interest, third party rights and royalties, all patents,
trademarks, service                marks, trade names, mask works, and copyrights and all
trade secrets, including                know-how, invention, designs, processes, computer
programs, algorithms, firmware                and technical data, concepts, techniques,
methods, systems, drawings,                photographs, models, prototypes, research
materials, formulas, development or                experimental work, work in progress,
mask work, cost data, marketing plans,                product plans, business strategies,
financial information, forecasts, personnel                information and customer or
supplier lists currently used and/or necessary for                the operation of the
businesses of the Company as presently conducted and as                presently proposed
to be conducted in the Updated Work Plan (collectively:                “Intellectual
Property”). 






	 	(b) 	Schedule
2.8  identifies each: (a) patent, trade mark,                domain name or
registration which has been issued to the Company or the                Subsidiary with
respect to any of the Intellectual Property; (b) pending patent                or trade
mark application or application for registration which the Company or                the
Subsidiary has made with respect to any of the Intellectual Property; (c)
               each trade name or unregistered trademark used by the Company or the
Subsidiary;                and (d) license, agreement, or other permission which the
Company or the                Subsidiary has received from or granted to any third party
with respect to any                of the Intellectual Property (together with any
exceptions). The Company has                delivered to Wellington correct and complete
copies of all such patents,                copyrights, trade marks, registrations,
applications, licenses, agreements, and                permissions (as amended to date)
and has made available to the Investors correct                and complete copies of all
other written documentation evidencing ownership and                prosecution (if
applicable) of each such item. With respect to each item of                Intellectual
Property required to be identified as set forth in this Section                2.8: (i)
the Company or the Subsidiary possess all right, title, and interest in
               and to the item, free and clear of any Security Interest, license,
royalty,                commission or similar arrangements or other restriction and free
and clear of                any right of any academic or research institution,
government, previous employer                of any of the Founders or any other third
party; (ii) the item is not subject to                any outstanding injunction,
judgment, order, decree, ruling, or charge; (iii) no                action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or                demand is
pending or is threatened which challenges in a material manner the
               legality, validity, enforceability, use, or ownership of the item; (iv)
neither                the Company not the Subsidiary has ever agreed to indemnify any
person for or                against any interference, infringement, misappropriation, or
other conflict with                respect to the item; and (v) neither the Company nor
the Subsidiary has granted,                and there are not outstanding, any options,
licenses or agreements of any kind                relating to the Intellectual Property,
nor is the Company or the Subsidiary                bound by or a party to any option,
license or agreement of any kind with respect                to any of the Intellectual
Property. 






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	 	(c) 	Each
item of Intellectual Property owned or used by the Company or the
               Subsidiary immediately prior to the Closing hereunder will be owned or
available                for use by them on substantially the same terms and conditions
immediately                subsequent to the Closing hereunder. Except for readily and
commercially                available off-the-shelf software, no other Intellectual
Property of any kind                required by the Company or the Subsidiary to conduct
their business, as                currently conducted and as presently proposed to be
conducted, is owned by a                third party or would require the payment of any
fee or royalty. The Company and                the Subsidiary have complied in all
material respects with the requirements of,                and has filed all material
documentation required in dealing with, any patent or                trademark registry
agency in which their patent and/or trademarks applications                were filed. 






	 	(d) 	To
the best knowledge of the Company, (i) neither the Company nor the Subsidiary
               has interfered with, infringed upon, misappropriated, or otherwise come
into                conflict with any intellectual property rights of any third party nor
will the                conducting by them of their business, or use of the Intellectual
Property, as                presently conducted and as presently proposed to be conducted
interfere,                infringe upon, misappropriate or otherwise come into conflict
with any                intellectual property rights of any third party; (ii) neither the
Company nor                the Subsidiary has received any charge, complaint, claim,
demand, or notice                alleging any such interference, infringement,
misappropriation, or violation                (including any claim that the Company or
the Subsidiary must license or refrain                from using any intellectual
property rights of any third party) and to the                Company’s knowledge
there is no basis for such; and (iii) to the best                knowledge of the
Company, no third party has interfered with, infringed upon,
               misappropriated, or otherwise come into conflict with any Intellectual
Property                of the Company or the Subsidiary. 






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	 	(e) 	Neither
the Company, Subsidiary nor the Founders are obligated nor is the                Company
aware that any of the Company’s or the Subsidiary’s employees
               (other than Founders) under any contract (including licenses, covenants or
               commitments of any nature) or other agreement, or subject to any judgment,
               decree or order of any court or administrative agency, that would
interfere with                the use of its, his or her best efforts to promote the
interests of the Company                or that would conflict with the Company’s or
the Subsidiary’s business                as now conducted and as presently proposed
to be conducted in the updated Work                Plan. Neither the execution nor the
delivery of this Agreement, the Shareholders                Rights Agreement, the
carrying on of the Company’s and the                Subsidiary’s business by
any of their respective employees, nor the conduct                of the Company’s
and the Subsidiary’s business as proposed to be                conducted, will:
either (i) to the best of the Company’s knowledge,                information or
belief, conflict with or result in a breach of the terms,                conditions or
provisions of, or constitute a default under, any contract,                covenant or
instrument under which any such employee other than the Founder is                now
obligated (including without limitation, any agreement with Orbot, Opal or
               Applied Materials), or (ii) conflict with or result in a breach of the
terms,                conditions or provisions of, or constitute a default under, any
contract,                covenant or instrument under which either Founder or the Company
or the                Subsidiary is now obligated (including without limitation, any
agreement with                Orbot, Opal or Applied Materials). To the best of the
Company’s knowledge                information or belief, for the conduct of its and
the Subsidiary’s business                as now conducted and as presently proposed
to be conducted in the Updated Work                Plan, it will not be necessary to
utilize any inventions of the Founders or any                of their employees (or
people it currently intends to hire) owned by any prior                employer. 






	 	
All
Intellectual Property related to the Company, the Subsidiary and their business,
developed by the Founders prior to the incorporation of the Company (“Founders IP”)
was duly assigned to the Company by the Founders at the time of, or following, the
incorporation of the Company, free and clear of any Security Interest, and to the Company’s
best knowledge, all declarations and documents required by the various authorities around
the world in order to register such assignments have been duly submitted; and neither the
Founders nor, to the Company’s best knowledge, any other party has any interest in
or rights to any of the Founders IP. During the period in which the Founders were
developing the Founders IP, the Founders to the Company’s best knowledge were not
employed by any third party or involved in any consulting relationship with any third
party. The Founders to the Company’s best knowledge are the sole inventors and
developers of the Founders IP (including the inventions, methods and devices described
and claimed in the patents which are part of such IP) without any contribution,
assistance or participation of any third party. 






	 	(f) 	Each
Founder, employee, officer and consultant of the Company or Subsidiary has
               executed a Proprietary Information and Inventions Agreement and/or an
Employment                Agreement and/or any similar agreement, containing
confidentiality, non compete                and assignment of invention provisions in the
form provided to Wellington, and                to the Company’s best knowledge none
of the Company’s or the                Subsidiary’s employees, Founders,
officers or consultants are in violation                thereof, and the Company will use
its best efforts to prevent any such                violation. 






	 	(g) 	The
Company and the Subsidiary have taken measures to protect the secrecy,
               confidentiality and value of all their intellectual property, which
measures are                reasonable and customary in the industry in which they
operate. 






	 	(h) 	There
are no outstanding options, licenses, or agreements of any kind relating
               to the foregoing, and neither the Company nor the Subsidiary is bound by
or is a                party to any options, licenses or agreements of any kind with
respect to the                patents, trademarks, service marks, trade names,
copyrights, trade secrets,                licenses, information, proprietary rights and
processes of any other person or                entity other than licenses arising from
the purchase or use of                “off-the-shelf” or other standard
products. 






- 9 -








	2.9.  	Compliance
with Law and Other Instruments.






Neither the Company nor the
Subsidiary is in violation or default of any provisions of their Memorandum or Articles of
Association or applicable charter documents, or of any instrument, judgment, order, writ,
decree or contract to which it is a party or by which it is bound or, of any provision of
law applicable to it, which violation or default is reasonably likely to have a Material
Adverse Effect. The execution, delivery and performance by the Company of this Agreement,
the Shareholders Rights Agreement and the consummation of the transactions contemplated
hereby and thereby will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and/or giving of notice, either a default
under any such material provision, instrument, judgment, order, writ, decree or contract
or an event which is reasonably likely to result in the creation of any material lien,
charge or encumbrance upon any assets of the Company or the Subsidiary, suspension,
revocation, impairment, forfeiture or non-renewal of any material permit, license,
authorization, or approval applicable to the Company or the Subsidiary, their business or
operations or any of their assets or properties. 



	2.10  	Agreements;
Action.  






	 	(a) 	Except
for the agreements explicitly contemplated hereby and by the Shareholders
               Rights Agreement there are no agreements, understandings or proposed
               transactions between the Company or the Subsidiary and any of their
officers,                directors or shareholders or their affiliates. 






	 	(b) 	There
are no Material Agreements, judgments, orders, writs or decrees to which
               the Company or the Subsidiary is a party or by which either is bound. 






	 	(c) 	For
purposes of Section 2.10(a) and (b), “Material Agreements”               shall
mean (i) any agreement or proposed transaction with respect to any
               transaction to which the Company or the Subsidiary is a party and in which
the                amount involved exceeds US$250,000, (ii) any agreement or
proposed                transaction which relates to the Company’s or the Subsidiary’s
               intellectual property and any agreement or proposed transaction which
relates to                intellectual property rights of any third party, (iii)
distribution agreements,                (iv) non-disclosure agreements (other than with
employees and distributors of                the Company or he Subsidiary), (v) any
agreement or proposed transaction between                the Company or the Subsidiary
and shareholder of the Company or other Interested                Party (as such a term
is defined under the Israeli Securities Act 1968) of the                Company, (vi) any
written agreement between the shareholders of the Company of                which the
Company has actual knowledge, (vii) any agreement or proposed                transaction
restricting or affecting the development, manufacture or                distribution of
the Company’s products or services, and (viii) any                agreement or
proposed transaction which materially restricts or limits the                Company’s
or the Subsidiary’s right to do business or compete in any                area or
any field with any person, firm or company. All Material Agreements are                in
full force and effect and the Company has no knowledge of the invalidity of
               or grounds for rescission on any of these agreements, or of any intention
to                terminate any such agreements. Neither the Company nor the Subsidiary
is a                guarantor or indemnitor of any indebtedness of any other person, firm
or                corporation nor is any person, firm or corporation a guarantor of any
               indebtedness of the Company or the Subsidiary. 






- 10 -







	 	
For
the purpose of this subsection 2.10(c) all indebtedness, liabilities, agreements,
understandings, instruments, contracts and proposed transactions involving the same
person or entity (including persons or entities the Company or the Subsidiary has reason
to believe are affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of this subsection. 






	 	(d) 	Other
than as set forth in the Financial Statements, since their incorporation,
               neither the Company nor the Subsidiary has (i) declared or paid any
dividends,                or authorized or made any distribution upon or with respect to
any class or                series of its capital stock, (ii) incurred any indebtedness
for money borrowed                or any other liabilities, (iii) made any loans or
advances to any person, or                given a guarantee or created any charge, lien
or other encumbrance on any of its                assets and/or its unissued and unpaid
share capital for any obligation of any                person, or (iv) sold, exchanged or
otherwise disposed of any of its assets or                rights, and in respect of (ii),
(iii) and (iv) other than in the ordinary course                of business. 






	 	(e) 	Neither
the Company nor the Subsidiary are parties to nor are they bound by any
               contract, agreement or instrument, or subject to any restriction under its
               Memorandum or Articles of Association, which is reasonably likely to have
a                Material Adverse Effect. 






	2.11  	Related-Party
Transactions.  






No employee, officer, or director of
the Company or the Subsidiary or member of his or her immediate family is indebted to the
Company or the Subsidiary, and neither the Company nor the Subsidiary are indebted (or
committed to make loans or extend or guarantee credit) to any of them. To the best of the
Company’s knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which either the Company or the Subsidiary are
affiliated or with which the Company or the Subsidiary have a business relationship, or
any firm or corporation that competes with the Company. To the best of the Company’s
knowledge, no member of the immediate family of any officer or director of the Company or
the Subsidiary is directly or indirectly interested in any material contract with the
Company. 



	2.12  	Permits.  






The Company and the Subsidiary have
all franchises, permits, licenses, and any similar authority necessary for the conduct of
their business as now being conducted by it, the lack of which is reasonably likely to
have a Material Adverse Effect, and the Company believes that the Company and the
Subsidiary can obtain, without undue burden or expense, any similar authority for the
conduct of their respective business as proposed to be conducted in the Updated Work Plan.
The Company and the Subsidiary are not in default in any material respect under any of
such franchises, permits, licenses, or other similar authority. 



	2.13  	Environmental
and Safety Laws.  






 To
the best knowledge, information or belief of the Company, neither the Company nor the
Subsidiary is in violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to the best knowledge information and
belief of the Company, no material expenditures are or will be required in order to comply
with any such existing statute, law or regulation. 



- 11 -







	2.14  	Manufacturing
and Marketing Rights.  






Neither the Company nor the Subsidiary
has granted rights to manufacture, produce, assemble, license, market, or sell its
respective products to any other person and is not bound by any agreement that affects the
Company’s exclusive right to develop, manufacture, assemble, distribute, market or
sell its respective products. 



	2.15  	Disclosure.  






The Company has fully provided the
Investors with all the information that the Investors have requested for deciding whether
to purchase the Issued Shares and to make the transactions contemplated in this Agreement
and in the Shareholders Rights Agreement, and all information which the Company believes
is necessary to enable the Investors to make such decisions. Neither this Agreement, the
Shareholders Rights Agreement, nor any other statements or certificates made or delivered
in connection herewith or therewith contains any untrue statement of a material fact or
omits to state a material fact necessary to make the statements herein or therein not
misleading. There is no material fact or information relating to the business, prospects,
condition (financial or otherwise), affairs, operations, or assets of the Company that has
not been disclosed to the Investors in writing by the Company. 



	2.16  	Updated
Work Plan.  






The Updated Work Plan attached hereto
as Schedule 2.1 which consists of: (i) the Work Plan dated January
2006, (ii) the Marketing Penetration Plan dated January 2006, and (iii) the January
2006 Annual Budget, all previously delivered to the Investors, have been prepared
in good faith by the Company and to the best knowledge, information or belief of the
Company do not contain any untrue statement of a material fact, nor are there any other
material facts or matters of which the Company is aware which are reasonably likely to
make the statements made therein misleading, except that with respect to projections and
assumptions contained in the Updated Work Plan, the Company represents only that such
projections and assumptions were prepared and/or made in good faith. The parties agree
that such estimates and projections are not purely factual in nature, that the business of
the Company is subject to certain risk factors and no assurance can be or is given that
the assumptions are correct or that any of the forecasts, projections, expectations or
transactions contemplated therein will be attained. 



	2.17  	Registration
Rights.  






Except as provided in the
Shareholders Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights and F-3 registration rights, to any person
or entity. 



	2.18  	Title
to Property and Assets.  






Full and accurate details of the
Company’s and the Subsidiary’s material tangible properties and assets are
contained in Schedule 2.18 to this Agreement. The Company and the
Subsidiary own their respective property and assets free and clear of all mortgages,
liens, loans and encumbrances. With respect to the property and assets that the Company
and the Subsidiary lease, the Company and the Subsidiary are in compliance with their
respective leases, except for such non-compliance which is not reasonably likely to have a
Material Adverse Effect and the Company and the Subsidiary hold valid leasehold interests
free of any material liens, claims or encumbrances. No tangible assets owned by the
Company are shared by the Company with any other person. 



- 12 -







	2.19  	Financial
Statements  






Attached as Schedule
2.19 is the Company’s audited consolidated annual financial statements
for the year ended December 31, 2005 (the “Financial Statements”). The
Financial Statements have been prepared in accordance with US generally accepted
accounting principles applied on a consistent basis throughout the periods indicated and
with each other. The Financial Statements accurately present, in all material respects,
the financial condition and operating results of the Company and the Subsidiary as of the
dates, and for the periods, indicated therein. All proper and necessary books of account
and accounting records have been maintained by the Company, are in its possession and
contain accurate information in accordance with generally accepted principles consistently
applied relating to all transactions to which the Company has been a party. 



	2.20  	Financial
Issues.  






	 	(a) 	The
Company and the Subsidiary maintain and will continue to maintain a standard
               system of accounting established and administered in accordance with US
GAAP                with reconciliation to Israeli GAAP. 






	 	(b) 	Except
as stated in the Financial Statements, neither the Company nor the
               Subsidiary has any liabilities, debts or obligations, whether accrued,
absolute                or contingent, incurred, since its incorporation, except in the
ordinary and                usual course of business. Since its incorporation, the
Company has been                operating in the ordinary and usual course of business. 






	2.21  	Changes.  






	 	
Since
December 31, 2005, there has not been:  






	 	(i) 	any
change in the assets, liabilities, financial condition or operating results
               of the Company or the Subsidiary from that reflected in the Financial
               Statements, except changes in the ordinary course of business that have
not                been, in the aggregate, materially adverse; 






	 	(ii) 	any
damage, destruction or loss, whether or not covered by insurance, having a
               Material Adverse Effect ; 






	 	(iii) 	any
waiver by the Company or the Subsidiary of a valuable right or of a material
               debt owed to it; 






	 	(iv) 	any
satisfaction or discharge of any lien, claim or encumbrance or payment of
               any obligation by the Company or the Subsidiary, except in the ordinary
course                of business and that is not material to the assets, properties,
financial                condition, operating results, prospects or business of the
Company (as such                business is presently conducted and as presently proposed
to be conducted in the                Updated Work Plan). 






- 13 -







	 	(v) 	any
change or amendment to a material contract or arrangement by which the
               Company or the Subsidiary or any of their respective assets or properties
are                bound or subject; 






	 	(vi) 	any
material change in any compensation arrangement or agreement with any
               employee of the Company; 






	 	(vii) 	any
sale, assignment or transfer of any patents, trademarks, copyrights, trade
               secrets or other intangible assets of the Company or the Subsidiary; 






	 	(viii) 	any
resignation or termination of employment of any key officer of the Company,
               and to the best knowledge of the Company there is no impending resignation
or                termination of employment of any such officer; 






	 	(ix) 	receipt
of notice that there has been a loss of, or material order cancellation
               by, any major customer of the Company; 






	 	(x) 	any
mortgage, pledge, transfer of a security interest in, or lien, created by
               the Company or the Subsidiary, with respect to any of their respective
material                properties or assets, except liens for taxes not yet due or
payable; 






	 	(xi) 	any
loans or guarantees made by the Company or the Subsidiary to or for the
               benefit of its respective employees, officers or directors, or any members
of                their immediate families, other than travel advances and other advances
made in                the ordinary course of its business; 






	 	(xii) 	any
declaration, setting aside or payment or other distribution in respect of
               any of the Company’s capital stock, or any direct or indirect
redemption,                purchase or other acquisition of any of such stock by the
Company; 






	 	(xiii) 	to
the best knowledge of the Company, any other event or condition of any
               character that is reasonably likely to have a Material Adverse Effect; or 






	 	(xiv) 	any
agreement or commitment by the Company or the Subsidiary to do any of the
               things described in this Section 2.21. 






	2.22  	Tax
Returns, Payments and Elections.  






The Company and the Subsidiary have
filed all tax returns and reports (including information returns and reports) as required
by law. These returns and reports are true and correct in all material respects. The
Company hereby represents and warrants that the provision for taxes of the Company and the
Subsidiary as shown in the Financial Statements is adequate for taxes due or accrued as of
the date thereof. To the best of their knowledge, the Company and the Subsidiary have not
elected pursuant to any applicable tax law any election that would have a material effect
on the Company, its respective financial condition, its respective business as presently
conducted or presently proposed to be conducted or any of its respective properties and/or
its respective material assets. The Company and the Subsidiary have never had any tax
deficiency proposed or assessed against them and have not executed any waiver of any
statute of limitations on the assessment or collection of any tax or governmental charge.
None of the Company’s or the Subsidiary’s income tax returns have ever been
audited by governmental authorities or, if audited no material comments or claims by
governmental authorities were made with respect to such audits. Since the date of the
Financial Statements, the Company and the Subsidiary have not incurred any taxes,
assessments or governmental charges other than in the ordinary course of business and the
Company and the Subsidiary have made adequate provisions on their respective books of
account for all taxes, assessments and governmental charges with respect to their
respective business, properties and operations for such period. The Company hereby
represents and warrants that the Company and the Subsidiary have withheld or collected
from each payment made to each of their respective employees, the amount of all taxes
(including, but not limited to, Israeli income taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or authorized
depositories. 



- 14 -







	2.23  	Minute
Books.  






The minute books of the Company and
the Subsidiary provided to the Investor’s counsel contain a complete summary of all
meetings of directors and shareholders since the time of their incorporation and reflect
all transactions referred to in such minutes accurately in all material respects. 



	2.24  	Labor
Agreements and Actions; Employee Compensation. 






	 	(a) 	Neither
the Company nor the Subsidiary is bound by or subject to (and none of                its
assets or properties is bound by or subject to) any written or oral, express
               or implied, contract, commitment or arrangement with any labor union other
than                those provisions of general agreements between the Federation of
Labor Unions                (the “Histadrut”) and the Coordination Bureau of
Economic                Organizations which may be applicable to certain classes of
employees by virtue                of extension orders, and no labor union has
requested or has sought to                represent any of the employees, representatives
or agents of the Company or the                Subsidiary. There is no strike or other
labor dispute involving the Company or                the Subsidiary pending, or to the
best knowledge of the Company, that is likely                to have a Material Adverse
Effect, nor is the Company aware of any labor                organization activity
involving the Company or the Subsidiary. The Company is                not aware that any
officer or key employee, or that any group of key employees,                intends to
terminate their employment with the Company or the Subsidiary, nor                does
the Company or the Subsidiary have a present intention to terminate the
               employment of any of the foregoing. Schedule 2.24 sets
               forth the names of each of the Company’s and the Subsidiary’s
               employees and consultants. The Company and the Subsidiary are or at the
Closing                will be a party to an employment agreement with each employee of
the Company and                the Subsidiary, as applicable. The employment of each
officer and employee of                the Company or the Subsidiary is terminable at the
will of the Company or the                Subsidiary, subject to the payment of severance
and other payments as provided                by law and/or pursuant to any applicable
employment agreements. The Company and                the Subsidiary have complied in all
material respects with all applicable laws                related to employment. Except
as set forth in Schedule 2.24(a) below, the                Company and the Subsidiary are
not parties to or bound by any currently                effective employment deferred
compensation agreement, bonus plan, incentive                plan, profit sharing plan,
retirement agreement, or other employee compensation                agreement. 






- 15 -







	 	
Schedule
2.24(a) contains a list of all written and material oral promises,
agreements, arrangements and understandings, with officers, directors, employees and
consultants (other than attorneys and accountants) of the Company and the Subsidiary,
which are presently in effect, detailing the name, title or position, annual
salary/compensation (including bonuses, commissions, and deferred compensation), pensions
(including those required by all applicable laws), retirement benefits, company cars,
profit sharing, and any interests in any incentive compensation plan. A copy of the
written (and a summary description of any material oral) agreements described in this
Section 2.24 was delivered to Wellington prior to the date hereof. 






	 	
The
severance pay to the employees of the Company and the Subsidiary is fully funded or
provided for in the Financial Statements in accordance with US generally accepted
accounting principals. All liabilities of the Company in connection with its employees
(excluding illness pay and advance notice of termination) were adequately accrued in the
Financial Statements and the Company is not aware of any circumstance whereby any
employee might demand any claim for compensation on termination of employment beyond the
amount of statutory or contractual severance pay to which such employee may be entitled.
All obligations of the Company and the Subsidiary with respect to statutorily required
severance payments have been fully satisfied or have been funded by contributions to
appropriate insurance funds. 






	 	(b) 	All
grantees under the Share Option Plans have provided Mr. Eliahu Lerner and/or
               Mr. Yehuda Zviel with a proxy for the exercise of all rights granted to
them                with respect to their shares and options, including voting rights,
until the                consummation of an IPO. 






	2.25  	Government
Sponsored Programs.  






Schedule 2.25
attached hereto contains an accurate and complete list of all grants and other benefits,
including tax benefits, received or applied for by the Company or the Subsidiary from any
governmental authority. The Company has received certain grants in support of its research
and development through the OCS. The Company is in compliance in all respects with all of
the terms and provisions of its grants from the OCS and any other grants or benefits
listed as received in Schedule 2.25 and applicable laws and
regulations in order to continue to qualify for such grants and in order not to give rise
to any obligation to prepay the amount of such grants nor to require the Company to repay
to the OCS any amount in excess of such grants before due. 



	2.26  	Brokers.  






Other than as set forth in
Schedule 8.3 hereunder, the Company has no contract, arrangement or
understanding with any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement. 



	2.27  	Significant
Customers and Suppliers.  






No customer, sub-contractor or
supplier that is significant to the Company or the Subsidiary, has terminated, materially
reduced or threatened to terminate or materially reduce or limit (i) its relationship with
the Company or the Subsidiary, or (ii) its purchases from or provision of products or
services to the Company or the Subsidiary, as the case may be. 



- 16 -







	2.28  	Insurance.  






The Company and the Subsidiary have
in full force and effect insurance policies of financially sound and reputable insurers,
as to their respective properties and business, in scope and amount customary and
reasonable for the businesses in which the Company and the Subsidiary are engaged or
presently propose to engage, with coverage sufficient in amount to allow them to replace
any of their material properties that might be damaged or destroyed or compensation by or
for the Company and the Subsidiary. The Company and the Subsidiary have not done or
suffered anything to be done that has rendered or might render any policies of insurance
void or voidable and the Company and the Subsidiary have complied in all material respects
with all conditions contained in such policies. Schedule 2.28 sets
forth a list of insurance policies currently maintained by the Company and the Subsidiary
and the coverage thereunder. 



	2.29  	Effectiveness;
Survival; Indemnification  






	 	(a) 	Closing:
Each representation and warranty of the Company is deemed to be                made
on the date of this Agreement and at the Closing, and shall survive and
               remain in full force and effect after the Closing for a period until the
earlier                of forty eight (48) months thereafter or the initial public
offering of the                Company’s securities, except for the each of the
representations and                warranties made in Sections 2.2 and 2.6 that shall be
in effect indefinitely,                and the representations and warranties made in
Sections 2.7, 2.8 and 2.22 which                shall remain in full force and effect
after the Closing for a period of 7                (seven) years or the initial public
offering of the Company’s securities,                whichever is the earlier. In
the event of any breach or misrepresentation of any                covenant, warranty or
representation made by the Company under this Agreement,                the Company shall
indemnify the Investors and hold them harmless from any and                all loss,
damage, liability and expense sustained or incurred by the Investors                as a
result of or in connection with said breach or misrepresentationfor
               an amount not exceeding the sum of the Purchase Price actually paid by
such                Investor to the Company pursuant to this Agreement. 






	 	(b) 	Notwithstanding
the foregoing, any limitations set forth in subsection 2.29                shall not
apply to any claim for indemnification that is based on a willful or
               intentional breach or misrepresentation of any covenant, warranty or
               representation made by the Company under this Section 2, and the
representations                and warranties made by the Company under this Section 2 in
respect of any such                claim shall be unlimited by time. 






	 	(c) 	Any
amount due to any Investor as a result of a claim for indemnification shall
               be determined after deducting or setting off, as the case may be, all
positive                monetary consequences of such event giving rise to such claim,
including                recovery from insurers and other third parties and any savings
of taxes or other                governmental or administrative levies. For the avoidance
of doubt, the                limitation under this Section 2.29(c), shall not restrict
any such insurer or                other third parties from claiming back from the
Company any moneys paid to the                Investors pursuant to this Section 2.29(c)
subject, however, to the restrictions                and limitations set forth in Section
2.29(a) and (b) above. 






- 17 -







	2.30  	Indemnity
Procedure.  






Promptly after receipt by an Investor
of notice of the commencement of any action, proceeding, or investigation of any third
party in respect of which indemnity may be sought as provided in subsection 2.29 above, it
shall accordingly notify the Company (the “Indemnitor”). The Company
shall promptly assume the defense of the Investor with counsel reasonably satisfactory to
the Investor, and the fees and expenses of such counsel shall be at the sole cost and
expense of the Company. The Investor will cooperate with the Indemnitor in the defense of
any action, proceeding, or investigation for which the Company assumes the defense. The
Indemnitor shall not be liable for the settlement of any action, proceeding, or
investigation effected without its consent, which consent shall not be unreasonably
withheld. 



	3.  	Representations
and Warranties of the Investors  






Each Investor hereby represents and
warrants that: 



	3.1  	Authorization:
Ownership of Shares.  






        All
action on the part of the Investor, its officers, directors and shareholders necessary for
the authorization, execution and delivery of this Agreement and the Shareholders Rights
Agreement, and the performance of all obligations hereunder has been taken or will be
taken prior to the Closing, and this Agreement and the Shareholders Rights Agreement
constitutes a valid and legally binding obligation of the Investor, enforceable in
accordance with its terms, subject only to laws affecting the rights and remedies of
creditors. The Investor is duly organized and properly registered in the jurisdiction of
its organization. The execution, delivery and performance of this Agreement and the
Shareholders Rights Agreement, will not violate any provision of the corporate documents
of the Investor, or of any instrument, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its best knowledge, of any provision of law,
rule or regulation applicable to the Investor. 



	3.2  	Purchase
Entirely for Own Account.  






        This
Agreement is made with the Investor in reliance upon the Investor’s representation to
the Company, which by the Investor’s execution of this Agreement the Investor hereby
confirms, that the Issued Shares, and the Conversion Shares (for the purposes of this
Section 3, collectively, the “Securities”) will be acquired for
investment for the Investor’s own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that the Investor has no
present intention of selling, granting any participation in, or otherwise distributing the
same. By executing this Agreement, the Investor further represents that it does not have
any contract, undertaking, agreement or arrangement with any person to sell, transfer or
grant participation to such person or to any third person, with respect to any of the
Securities. 



	3.3  	Disclosure
of Information.  






        The
Investor represents that it is a sophisticated investor with the experience in making
venture capital investments, including in high-tech companies and projects. It was not
organized for the specific purpose of acquiring the Issued Shares, or the Conversion
Shares. It is able financially to bear the risks involved in such investment and it has
received all the information it considers necessary or appropriate for deciding whether to
purchase the Issued Shares. The Investor further represents that it has had an opportunity
to ask questions and receive answers from the Company regarding the Company, its business,
management, financial affairs and the terms and conditions of the offering of the Issued
Shares. The foregoing, however, does not limit or modify the representations and
warranties in Section 2 of this Agreement or the right of the Investor to rely thereon. 



- 18 -







	3.4  	Office
of the Chief Scientist  






        It
is aware that the Company has received financing for certain research and development
projects through the OCS and it is aware, and agrees to the application, of the provisions
of the Law for the Encouragement of Industrial Research and Development, 5744-1984 and of
Regulations promulgated thereunder and their applicability to the Company, including,
inter alia: 



	 	(a) 	the
Company’s obligation to pay royalties to the State of Israel; 






	 	(b) 	that
the manufacture of any product developed as a result of any project so
               funded take place in the State of Israel unless the Research Committee of
the                OCS pursuant to the above law otherwise determines, subject to and
pursuant to                the above law; and 






	 	(c) 	that
know-how derived from any project so funded may not be transferred to third
               parties without the approval of the Research Committee of the OCS subject
to and                pursuant to the above law. 






	3.5  	Israeli
Securities Law  






	 	
If
listed in Schedule 3.5 A it is a “Venture Capital Fund” as
defined in the Appendix to the Israeli Securities Law, 5768-1968 and if listed in Schedule
3.5 B it confirms that it is not a residnt of Israel and that no offer to
purchase securities of the Company was made to it in Israel.  






	4.  	Conditions
of Investor’s Obligations at Closing.  






        The
obligations of the Investors under subsections 1.1 and 1.3 of this Agreement are subject
to the fulfillment on or before the Closing, of each of the following conditions (any or
all of which may be waived, in whole or in part, by the Majority Investors): 



	4.1  	Representations
and Warranties.  






        The
representations and warranties contained in Section 2 shall be true on and as of the
Closing as though such representations and warranties had been made on and as of the date
of the Closing. 



	4.2  	Performance.  






        The
Company shall have performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied with by it on or
before the Closing. 



	4.3  	Proceedings
and Documents.  






        All
corporate and other proceedings in connection with the transactions contemplated at the
Closing, and all documents incident thereto shall be reasonably satisfactory in form and
substance to the Investors’ counsel, and the Investors shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request. 



- 19 -







	4.4  	Consents
and Approvals, Delivery of Documents  






        The
Company shall have received and shall have provided the Investors with copies,
satisfactory to the Investors’ counsel, of all permits, consents, approvals and
authorizations which shall be necessary or required to consummate this Agreement, the
Shareholders Rights Agreement and to issue and sell the Issued Shares, including without
limitation the waivers, consents and approvals set forth in Section 1.3 hereof, and OCS
and Investments Center’s approval for the transactions contemplated hereby and for
the issuance of the Issued Shares. All the actions to be taken as set forth in Section 1.3
above shall have been completed to the satisfaction of the Investors. Documents to be
delivered by the Company, as set forth in Section 1.3 above, shall be delivered. All such
documents shall be satisfactory in form and substance to the Investors. 



	4.5  	Opinion
of Company Counsel.  






        On
or prior to the Closing, the Investors shall have received from Cohen, Cohen, Yaron-Eldar
& Co. Law Offices, counsel for the Company, an opinion, dated as of Closing, in form
and substance acceptable to Investors’ counsel attached hereto as Schedule
4.5. 



	4.6  	Shareholders
Rights Agreement  






        On
or prior to the Closing, the Shareholders Rights Agreement shall have been amended as set
forth in Exhibit B hereto. 



	4.7  	Absence
of Adverse Changes  






        From
the date hereof until the Closing, there will have been no material adverse change in the
financial or business condition or prospects of the Company, in the sole judgment of the
Investors. 



	4.8  	No
Action.  






No action, suit, or proceeding shall
be pending or threatened before any court or quasi-judicial or administrative agency of
any state, municipal, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge would: (i) prevent
consummation of any of the transactions contemplated by this Agreement; (ii) cause any of
the transactions contemplated by this Agreement to be rescinded following consummation. 



	4.9  	Amended
Articles of Association.  






        Prior
to the Closing, the Amended Articles shall have been adopted by the Company’s
shareholders. 



	4.10  	Officer’s
Certificate.  






        On
or prior to the Closing, a certificate from the chief executive officer of the Company,
certifying as to the matters set forth in Section 4.1, 4.2, 4.7 and 4.8 in the form
attached hereto as Schedule 4.10, shall have been delivered to the
Investors. 



- 20 -







	4.11  	Due
Diligence Review  






        The
Investor’s legal, business and financial due diligence review of the Company and the
Subsidiary shall have been completed to the sole and complete satisfaction of the
Investors and their counsel. 



	4.12  	Directors
Indemnity  






        The
Company shall have entered into an Indemnity Agreement with the director appointed by
Wellington Partners Ventures III Technology Fund, L.P. (“Wellington”) in
the form attached hereto as Schedule 4.12. 



	4.13  	Directors
and Officers’ Insurance  






        Prior
to the Closing, the Company shall obtain and maintain in full force and effect, Directors
and Officers insurance policies of financially sound and reputable insurers, covering the
directors in the Company (including the newly designated directors) in the scope and
amount acceptable to the Majority Investors, and in no event less than US$3,000,000. 



	5.  	Conditions
of the Company’s Obligations at Closing.  






        The
obligations of the Company to the Investors under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions: 



	5.1  	Representations
and Warranties.  






        The
representations and warranties of the Investors contained in Section 3 shall be true on
and as of the Closing with the same effect as though such representations and warranties
had been made on and as of the Closing. 



	5.2  	Payment
of Consideration.  






        The
Investors shall have delivered the consideration specified in Section 1.1. 



	5.3  	Shareholders
Rights Agreement  






        On
or prior to the Closing, the Shareholders Rights Agreement shall have been amended as set
forth in Exhibit B hereto. 



	5.4  	Amended
Articles of Association.  






        Prior
to the Closing, the Amended Articles shall have been adopted by the Company’s
shareholders. 



	5.5  	Consents
and Approvals  






        The
Company shall have received all permits, consents, approvals and authorizations which
shall be necessary or required to consummate this Agreement and to issue and sell the
Issued Shares and shall have received the Board and shareholders approval for the transfer
of the Founders’ Purchased Shares. 



- 21 -







	5.6  	No
Judgment or Order.  






        There
shall not be on the Closing, any judgment or order of a court of competent jurisdiction or
any ruling, regulation or order of any agency of the Israeli government which would
prohibit or have the effect of preventing consummation of the sale of the Issued Shares. 



	5A.  	Pre-Closing
Agreements  






        The
parties agree as follows with respect to the period from the execution of this Agreement
and until the earlier to occur of: (i) March 31, 2006 and (ii) the Closing; 



        5A.1
General. Each of the Parties will use its best efforts to take all action and to do all
things necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement and the ancillary agreements (including
satisfaction of the Closing conditions set forth in Sections 4 and 5 above). 



        5A.2
Operation of Business. The Company will not engage in any practice, take any action, or
enter into any transaction outside the ordinary course of business. Without limiting the
generality of the foregoing, the Company will not (unless otherwise set forth in this
Agreement): (i) authorize or effect any change in its Articles of Association;
(ii) issue any new shares of the Company, cause or permit any sale or conveyance of
any of the outstanding shares of the Company, or sell, assign, transfer or convey any of
the assets of the Company; or (iii) solicit any offers for, provide detailed
information in response to any unsolicited offers for, or conduct any negotiations with
any other person or entity in respect of the sale of shares in the Company, or the assets
of the Company or any substantial portion of such assets, in each such case – other
than the grant of options or shares to directors/employees/consultants in the ordinary
course of business or the issuance of shares in connection with an option or warrant
exercise outstanding at the date hereof and other than any other action the Company is
required to carry out prior to the Closing as set forth herein. 



	6.  	Covenants
of the Company.  






	6.1  	Use
of Proceeds.  






        The
Company shall utilize the funds received from the Investors under this Agreement in
accordance with the budget of the Company attached hereto as Schedule
2.1, as updated from time to time in by the Board of Directors of the
Company. 



	6.2  	Amended
Articles of Association.  






        Within
14 days of the Closing, the Company shall file the Amended Articles with the Israeli
Registrar of Companies. 




	7. 	               No
party, other than Intel Atlantic, Inc. (with respect to which the terms of
               the Side Agreement of even date hereof shall apply), shall issue any
public                statement or release concerning this Agreement and the transactions
contemplated                hereby without the prior written approval of the Company and
the Majority                Investors. 






	8.  	Miscellaneous.  






	8.1  	Survival
of Representations; Indemnification. 






        The
warranties, representations and covenants of the Company and the Investors contained in or
made pursuant to this Agreement shall survive the execution and delivery of this Agreement
and the Closing and shall in no way be affected by any investigation of the subject matter
thereof made by or on behalf of the Investor or the Company. 



- 22 -







	8.2  	Successors
and Assigns.  






        Except
as otherwise provided herein, the terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the parties
(including Permitted Transferees, as such term is defined in the Company’s Amended
Articles, of any Issued Shares and Conversion Shares). Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, obligations, or liabilities under or by
reason of this Agreement, except as expressly provided in this Agreement. 



	8.3  	Finders
Fee  






        Each
of the Company and the Investors represent as to themselves, that, other than as stated in
Schedule 8.3, no person or entity shall be entitled to any
broker’s or finder’s fees or any other commission or similar fee in connection
with this Agreement. The Company agrees to indemnify and to hold harmless the Investors
and the Investors agree to indemnify and hold harmless the Company and the Founders from
any liability for any commission or compensation in the nature of a finders’ fee (and
the costs and expenses of defending against such liability or asserted liability) for
which the Investors or the Company, or any of their respective officers, partners,
employees, or representatives are respectively responsible. 



	8.4  	Governing
Law.  






        The
Company and the Investors agree that this Agreement shall be governed by and construed
under the laws of the State of Israel and that the exclusive place of jurisdiction in any
matter arising out of or in connection with this Agreement shall be the applicable Tel
Aviv Court. 



	8.5  	Counterparts.  






        This
Agreement may be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same instrument. 



	8.6  	Titles
and Subtitles.  






        The
titles and subtitles used in this Agreement are used for convenience only and are not to
be considered in construing or interpreting this Agreement. 



	8.7  	Notices.  






        Unless
otherwise provided, any notice required or permitted under this Agreement shall be given
in writing, shall be effective when given, and shall in any event be deemed to be given
upon receipt or, if earlier, (a) five (5) days after the day of deposit with a National
Post Office, if delivered by first class mail, postage prepaid, if addressed to a party in
the same country or fourteen (14) after deposit with a National Post Office, if delivered
by first class mail, postage prepaid, if addressed to a party in a different country, (b)
upon delivery, if delivered by hand (c) five (5) days after the day of deposit with
recognized overnight courier service freight prepaid or (d) one (1) business days after
the business day of facsimile transmission, if delivered by facsimile transmission with a
copy by first class mail, postage prepaid, and each notice shall be addressed to the party
to be notified at the address set forth in this section as follows: 



- 23 -









		
		
		
		
		
	For the Company.
Negevtech Ltd. 
	attn:	CEO
	address:	Beit Tamar
	 	12 Hamada St.
	 	Rehovot 76122
	 
	tel:	08-9366050
	fax:	08-9366051






For the Investors:  



As set out on Schedule
A. 



or at such other address as such
party may designate by fourteen (14) days’ advance written notice to the other
parties. 



	8.8  	Expenses.  






        Upon
Closing, the Company will pay from the proceeds of the Investment the due diligence, legal
and other professional fees and expenses actually incurred by Wellington in connection
with this transaction, up to a total of $50,000 (plus VAT, if applicable). 



	8.9  	Entire
Agreement; Amendments and Waivers.  






        This
Agreement (together with the schedules and exhibits attached hereto) contains the entire
understanding of the parties with respect to its subject matter and all prior
negotiations, discussions, commitments, and understandings heretofore between them with
respect thereto are merged herein. Any term of this Agreement may be amended, directly or
indirectly, and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the Majority Investors, excluding, however,
the number of shares issued to each Investor and the Price Per Share, that may not be
changed with respect to such Investor unless such Investor has consented thereto in
writing. 



	8.10  	Severability.  






        If
one or more provisions of this Agreement are held to be unenforceable under applicable
law, such provision shall be excluded from this Agreement and the balance of the Agreement
shall be interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms. 



[Remainder of Page
Intentionally Left Blank] 



- 24 -







IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first above written. 




Negevtech Ltd.  


		
		
		
		
		
	By:	___________________________
	 	                       /title
	 
	 	___________________________
	 	                       /title








[SIGNATURE
PAGE TO SERIES BB PURCHASE AGREEMENT IN NEGEVTECH LTD. DATED MARCH 2006] 



- 25 -







[2nd
signature page to Series BB Preferred Share Purchase Agreement in Negevtech Ltd. dated
March 2006] 




IN WITNESS WHEREOF, we affix our
signatures hereto as of the date set forth above. 


			
			
			
			
			
	____________________________	____________________________	____________________________
	Wellington Partners Ventures III	Intel Atlantic, Inc.	Pitango Venture Capital Fund III
	Technology Fund, L.P.	 	(Israeli Sub) L.P.
	 	By: ________________	By: ________________
	 	Title: _______________	Title: _______________
	____________________________	____________________________	____________________________
	Pitango Venture Capital Fund III	Pitango Venture Capital Fund III	Pitango Venture Capital Fund III
	(Israeli Sub.) Non-Q L.P.	Trusts 2000 L.P.	(Israeli Investors) L.P.
	By: ________________	By: ________________	By: ________________
	Title: ______________	Title: ______________	Title: ______________
	____________________________	____________________________	____________________________
	Pitango Principles Fund III
	(Israel) L.P.
	By: ______________
	Title: _____________
	____________________________	____________________________	____________________________
	 	SVE Star Ventures Enterprises	Star Management of Investments
	 	Gmbh & Co. No. IX KG.	No. II (2000) L.P.
	 	By: Dr. Meir Barel	By: Dr. Meir Barel
	 	Title: Managing Director	Title: Managing Director
	____________________________	____________________________	____________________________
	Star Growth Enterprise, a German	 	Genesis Partners II, L.D.C.
	Civil Law Partnership (with
	limitation of liability)
	By: SVM Star Ventures
	Managementgesellschaft mbH Nr. 3
	 
	By: Dr. Meir Barel	 	By: ________________
	Title: Managing Director	 	Title: ______________
	____________________________	____________________________	____________________________
	Genesis Partners II (Israel) L.P.	Poalim Ventures Ltd.	Poalim Ventures I Ltd.
	 
	By: ________________	By: ________________	By: ________________
	Title: _______________	Title: _______________	Title: _______________
	 
	____________________________
	Poalim Ventures II L.P.
	By: ________________
	Title: _______________






- 26 -









Schedule
A  



List
of Investors  




	Investor 	Purchase

Price $ 	Purchased

 Shares# 	Address 
	Preferred BB-3 Shares 
	SVE Star Ventures Enterprises GmbH & Co. No. IX KG.	183,373 	79,061 	Star Ventures Management
 Attn.Michael Sailer 
Possartstrasse 9 
D-81679 Munich 
Germany
	Star Management of Investments No. II (2000) L.P.	19,784 	8,530 
	Star Growth Enterprise, a German Civil Law Partnership (with limitation of Liability)	421,843 	181,876 
	Poalim Ventures Ltd.	110,469 	47,628 	Alrov Tower, 46 Rothschild Blvd, Tel Aviv 66883, Israel
 Number for notices being delivered by facsimile: 03-5675760
	Poalim Ventures I Ltd.	169,952 	73,274 
	Poalim Ventures II L.P.	344,579 	148,564 
	Genesis Partners II, L.D.C.	544,623 	234,812 	11 HaManofim St. Bldg. B Herzliya 46725
	Genesis Partners II (Israel) L.P.	80,377 	34,654 
	Pitango Venture Capital Fund III (Israeli Sub) L.P.	425,621 	183,505 	11 HaManofim St. Bldg. B Herzliya 46725
	Pitango Venture Capital Fund III (Israeli Sub.) Non-Q L.P.	39,347 	16,964 
	Pitango Venture Capital Fund III (Israeli Investors) L.P.	115,087 	49,619 
	Pitango Principles Fund III (Israel) L.P.	14,982 	6,460 
	Pitango Venture Capital Fund II Trusts 2000 L.P.	29,963 	12,918 










































	Intel  Atlantic, Inc.	1,100,000 	474,261 	Intel Atlantic, Inc.:



Address for notices being delivered by hand/courier:



EMEA Portfolio Management

c/o Intel Corporation (UK) Ltd.

Mail-stop iSw 68

Pipers Way, Swindon

Wiltshire SN3 1RJ

United Kingdom



With copy to:

EMEAportfolio@intel.com



Number for notices being delivered by facsimile:



+ 44 (0) 1793 403524 and marked 'Attn: EMEA Portfolio Management'



With copy to:

EMEAportfolio@intel.com



Notice delivery by e-mail:

EMEAportfolio@intel.com 

	Wellington Partners Venture III Technology Fund L.P.	7,400,000 	3,190,480 	c/o Aztec Financial Services Limited

PO Box 730

32 Commercial Street

St Helier

Jersey

JE4 0QH







- 2 -








Schedule 1.4(a)(i)  



                    
               ACTION BY UNANIMOUS WRITTEN CONSENT

                                           OF THE SHAREHOLDERS
    
                                        OF NEGEVTECH LTD.
        
                (IN LIEU OF A GENERAL MEETING AND ANY ADJOURNMENT THEREOF)
            
                               DATED MARCH 22, 2006








In lieu of a General Meeting of the
shareholders of Negevtech Ltd. (the “Company”), the undersigned,
constituting all of the shareholders of the Company, hereby waive any requirement of prior
notice and separate class meting and adopt the following resolutions as resolutions in
writing: 



	1.  	Changes
in Share Capital  






        In
connection with the closing of the Company’s proposed issuance of Series BB-3
Preferred Shares (the first of such closings, if there will be more than one, the
“Closing” and the “Financing”, respectively) it is
necessary to make certain changes to the Company’s registered (authorized) and
unissued and registered and issued share capital. Accordingly, the following resolutions
are hereby unanimously adopted: 



          	 	1.1. 	
               Increase of Registered Share Capital and Creation of New Class of Shares;
               Amendment of Memorandum  of Association and Articles of Association 


               



	 	
RESOLVED,
unanimously, as a special resolution, all subject to and effective immediately prior to
the Closing, to increase the registered share capital of the Company by NIS 100,000
divided into (i) 5,000,000 newly created Series BB-3 Preferred Shares nominal value NIS
0.01 each (“Series BB-3 Preferred Shares”) and (ii) 5,000,000 Ordinary
Shares nominal value NIS 0.01 each, and to amend the Memorandum of Association and
Articles of Association of the Company accordingly. 






	 	
The
powers, preferences, rights and restrictions of the Series BB-3 Preferred Shares and other
matters relating thereto shall be as set forth from time to time in the Articles of
Association of the Company. 






	  	1.2.  	Conversion
of Shares Held by Genesis Entities  






	 	
In
connection with the Financing, Series BB-1 Preferred Shares issued in January 2006 upon
the deferred closing of the previous financing (the Poalim financing) to Genesis entities
(an aggregate number of 862,292 Preferred BB-1 Shares) shall be converted into the new
class of Series BB-3 Preferred Shares. 






	 	
RESOLVED,
unanimously, to approve, all subject to and effective immediately prior to the Closing,
the conversion of 751,400 duly authorized, validly issued, fully paid and non-assessable
BB-1 Preferred Shares held by Genesis Partners II, L.D.C. and 110,892 duly authorized,
validly issued, fully paid and non-assessable BB-1 Preferred Shares held by Genesis
Partners II (Israel), L.P. into the same number (i.e., on a one for one basis) of duly
authorized, validly issued, fully paid and non-assessable BB-3 Preferred Shares. 














	  	1.3  	Summary;
Authorization to sign and deliver notices; General  






	 	
Accordingly,
effective immediately following the increase of share capital provided for in item 1.1
above and the conversion of shares held by Genesis entities provided for in item 1.2 above
and immediately following the Closing, the registered (authorized) share capital of the
Company will be NIS 855,700 divided into: 






	 	
(a)
          47,000,996 Ordinary Shares of which 428,949 will be issued and outstanding;  






	 	
(b)
          1,569,004 Ordinary-Preferred Shares of which all will be issued and
outstanding;  






	 	
(c)
          15,000,000 Series AA Preferred Shares of which 13,144,070 will be issued and
          outstanding;  






	 	
(d)
          12,137,708 Series BB-1 Preferred Shares of which 8,152,256 will be issued and
          outstanding;  






	 	
(e)
          4,000,000 Series BB-2 Preferred Shares of which 3,597,106 will be issued and
          outstanding; and  






	 	
(f)
          5,862,292 Series BB-3 Preferred Shares of which 5,604,898 will be issued and
          outstanding.  






	 	
The
powers, preferences, rights and restrictions of which and other matters relating thereto
shall be as set forth from time to time in the Articles of Association of the Company. 






	 	
The
undersigned are aware that the foregoing resolutions require the consent of certain
majority of the holders of classes of preferred shares of the Company, as provided for in
the Articles. 






	 	
RESOLVED,
to authorize each of the Company’s directors to sign and deliver any notices required
with respect to the above to the Registrar of Companies in the name of the Company and on
its behalf. 






	 	
The
undersigned are aware of the interest of the director appointed by Genesis (as such term
is defined in the Articles of Association of the Company), in item 1.2 above. 






- 2 -







	2.  	Adoption
of New Articles of Association  






	 	
RESOLVED,
unanimously, all subject to and effective immediately prior to the Closing, to approve and
adopt the New Articles of Association attached hereto as Exhibit A
(the “New  Articles”), as the Articles of Association of the
Company, such New Articles to be filed by the Company with the Companies Registrar, in
place of the current Articles of Association. 






	 	
RESOLVED,
unanimously, to authorize each of the Company’s directors to sign and deliver any
notices required with respect to the above to the Registrar of Companies in the name of
the Company and on its behalf. 






	 	
The
undersigned acknowledge that they are aware of the interests of the directors of the
Company in the New Articles, either as grantees of special rights pursuant thereto or due
to their interests in grantees of special rights pursuant thereto. 






     	3.	
          Approval of Share Purchase Agreement and Amendment to Shareholders Rights
          Agreement;  Authorization of Sale and Issuance of Shares; General
          Authorization and Approval 


          



	 	
RESOLVED,
unanimously, to authorize and approve, all subject to and effective immediately prior to
the Closing, the following: 






          	 	3.1. 	
               That certain Series BB Preferred Share Purchase Agreement, between the Company
               and the Investors, as defined therein, with respect to the Financing,
               substantially in the form attached hereto as Exhibit B, for
               the sale of up to 4,742,606 Series BB-3 Preferred Shares to certain Investors
               (the “Share Purchase Agreement”) including, the execution,
               delivery and performance of the Share Purchase Agreement, the consummation of
               the transactions provided for therein and the performance by the Company of its
               obligations thereunder, including, inter alia, the issuance and sale of such
               Series BB-3 Preferred Shares (the “Series BB-3 Preferred
               Shares”) and any shares issuable upon the conversion thereof, all of
               the above without need for any further act, approval or authority of the
               Company’s Board of Directors, of the Shareholders or of the Company, and
               all ancillary transactions, documents, schedules and exhibits contemplated by
               and/or associated with the Share Purchase Agreement (whether or not approved
               separately herein) and to authorize any two of the directors of the Company to
               execute and deliver the Share Purchase Agreement in the name of the Company and
               on its behalf, with such changes therein or additions thereto as such directors
               executing the Share Purchase Agreement shall approve, with the understanding
               that substantive changes to the Share Purchase Agreement shall be submitted to
               the Company’s Board of Directors, and only the Board of Directors, for its
               approval (such approval deemed to be granted by the shareholders). Such Series
               BB-3 Preferred Shares, the Ordinary Shares into which such shares may be
               converted any additional Ordinary Shares issued in connection with such
               conversion, when issued and paid for (or deemed paid for) in accordance with the
               provisions of the Share Purchase Agreement and the New Articles will be duly
               authorized, validly issued, fully paid and non-assessable. 


               



- 3 -







          	 	3.2. 	
               That certain amendment to the Shareholders Rights Agreement, between the Company
               and the parties thereto, as defined therein, substantially in the form attached
               hereto as Exhibit C (the “Amendment to
               Shareholders Rights Agreement”), including, inter alia, the
               execution, delivery and performance of the Amendment to Shareholders Rights
               Agreement and to authorize any two of the directors of the Company to execute
               and deliver the Amendment to Shareholders Rights Agreement in the name of the
               Company and on its behalf, with such changes therein or additions thereto as
               such directors executing the Amendment to Shareholders Rights Agreement shall
               approve with the understanding that substantive changes to the Amendment to
               Shareholders Rights Agreement shall be submitted to the Company’s Board of
               Directors, and only the Board of Directors, for its approval (such approval
               deemed granted by the shareholders). 


               



          	 	3.3. 	
               Any other matter described or set forth in the Share Purchase Agreement and/or
               the Amendment to Shareholders Rights Agreement which requires the authorization
               or approval of the Board of Directors or of the Shareholders of the Company and
               to authorize any two of the directors of the Company to take such acts and to
               execute such documents in the name of the Company and on its behalf as may be
               required to implement the Share Purchase Agreement and/or the Amendment to
               Shareholders Rights Agreement and the transactions contemplated therein. 


               



          	 	3.4. 	
               That the execution, delivery and performance of the Share Purchase Agreement and
               the Amendment to Shareholders Rights Agreement and the consummation of the
               transactions provided for therein do not prejudice the best interests of the
               Company. 


               



	 	
The
undersigned acknowledge that they are aware of the interests of certain of the directors
of the Company in the Financing, the Share Purchase Agreement and the Amendment to
Shareholders Rights Agreement, either as direct parties thereto or due to their interests
in parties thereto. 






	4. 	Increase
in Number of Shares Reserved for Purposes of the Company’s           Share Option
Plans






	 	
RESOLVED,
unanimously, to approve all subject to and effective immediately following to the Closing: 






	  	4.1  	Israeli
ESOP  






	 	
To
increase of the number of Ordinary Shares reserved for issuance under the Company’s
Employee Share Ownership and Option Plan (2001, as amended 2003 and 2004) (the “IL
 Plan”) by 750,000 additional Ordinary Shares, thereby bringing the total number
of Ordinary Shares reserved for issuance under the IL Plan to 5,424,503 Ordinary Shares
subject to and immediately following the Closing, comprised of the following: 197,500
Ordinary Shares which have been issued following exercise of options granted to employees
of the Company, 4,313,226 Ordinary Shares subject to outstanding options and 913,777
Ordinary Shares available for future grant. 






- 4 -







	  	4.2  	US
ESOP  






	 	
To
increase of the number of Ordinary Shares reserved for issuance under the Company’s
Employee Share Option Plan (2002) (the “US Plan”) by 175,000 additional
Ordinary Shares, thereby bringing the total number of Ordinary Shares reserved for
issuance under the US Plan to 605,000 Ordinary Shares, subject to and immediately
following the Closing, comprised of the following: 362,000 Ordinary Shares subject to
outstanding options and 243,000 Ordinary Shares available for future grant. 






	  	4.3  	Other
Options  






	 	
It
is clarified that the foregoing does not include options to purchase 120,560 Ordinary
Shares of the Company granted to service providers (including 87,791 granted to TICI). 






	 	
The
undersigned acknowledge that they are aware of the interests of the directors of the
Company in this matter, as potential grantees of options pursuant to the Plans. 






	5.  	Grant
of Options to Mr. Rafi Yizhar  






	 	
RESOLVED,
unanimously, to approve the grant to Mr. Rafi Yizhar, a director of the Company, an option
to purchase up to 40,000 Ordinary Shares of the Company, nominal value NIS 0.01, at an
exercise price of $0.63, all pursuant to the provisions of the IL Plan and in accordance
with the terms and conditions of an option agreement to be entered into between the
Company and Mr. Yizhar, as customary in the Company. The options shall vest and be
exercisable in accordance with the following schedule: (1) 20,000 options shall vest on
29.9.2007; (ii) 10,000 options shall vest on 29.9.2008; and (iii) 10,000 options shall
vest on 29.9.2009, subject to Mr. Yizhar’s continued service to the Company. 






	 	
The
undersigned are aware of the interests of Mr. Yizhar in this matter.  






	6.  	Omnibus
Resolutions  






	 	
RESOLVED,
unanimously, that the undersigned deem the actions sanctioned by the foregoing resolutions
to be advisable and in the best interests of the Company and its shareholders. 






	 	
RESOLVED,
unanimously, that any of the appropriate officers of the Company be, and each of them
hereby is, authorized to prepare, execute, deliver and perform, as the case may be, such
agreements, amendments, applications, approvals, certificates, communications, consents,
demands, directions, documents, further assurances, instruments, notices, orders, requests
resolutions, supplements or undertakings, as each such officer, in his discretion, shall
deem necessary or advisable to carry out the intent and purposes of the foregoing
resolutions; and that the preparation, execution, delivery and performance of any such
agreements, amendments, applications, approvals, certificates, communications, consents,
demands, directions, documents, further assurances, instruments, notices, orders,
requests, resolutions, supplements or undertakings shall be conclusive evidence of the
approval of the Company’s Board of Directors thereof and all matters relating
thereto. 






- 5 -







	 	
RESOLVED,
unanimously, that any and all actions heretofore taken by the officers of the Company in
the name and on behalf of the Company in furtherance of the preceding resolutions, are
hereby ratified, approved and adopted. 






In addition to each of the
undersigned’s consent to the foregoing resolutions, each of the undersigned hereby
confirms that none of the issued and outstanding shares of the Company have been issued in
violation of any pre-emptive rights, rights of first refusal or other similar rights it
may have, whether pursuant to the Articles of Association of the Company or to any
agreement to which it may be a party or otherwise, and hereby waives any pre-emptive
rights, rights of first refusal, co-sale rights or other similar rights it may have
pursuant to the Articles of Association (old and new) of the Company or to any agreement
or otherwise with respect to (A) any of the Series BB-3 Preferred Shares which will be
issued pursuant to the Share Purchase Agreement, except to the extent of its participation
as provided under the Share Purchase Agreement, and (B) any other shares issuable to the
holders of the Series BB-3 Preferred Shares upon conversion or otherwise pursuant to the
New Articles and/or the Share Purchase Agreement to protect them against dilution. 



Each person or entity signed below
further acknowledges, confirms and agrees that: (i) its signature below also constitutes a
separate written consent of each person or entity who is a holder of shares of the Company
for all purposes for which the consent of such shareholder or all shareholders is required
in connection with the above matters, whether as holders of a separate class of shares,
including Ordinary Shares, Ordinary-Preferred Shares, Series AA Preferred Shares, Series
BB-1 Preferred Shares or Series BB-2 Preferred Shares, or otherwise, pursuant to the
Articles of Association of the Company, to any agreement to which the undersigned or the
Company is a party or otherwise; (ii) in the event that a general meeting of the
Company’s shareholders is held with respect to the above matters, each of the
undersigned hereby waives the requirement for advance notice of such meeting and agrees to
it being held without the advance notice as may otherwise be required pursuant to the
Company’s Articles of Association or applicable law, and also agrees that in the
event it attends such meeting, by its signature below it undertakes to vote all its shares
of the Company in favor of the above matters at any such meeting of shareholders
(including any adjournments thereof); and (iii) in the event it does not attend such
meeting, its signature below will be considered as an irrevocable appointment of Dr. Arnon
Gat and in his absence of Oz Desheh (with full powers of substitution) as its proxy with
respect to all its shares of the Company to participate and vote in its name and on its
behalf in favor of the above matters at any such meeting of shareholders (including any
adjournments thereof). 



- 6 -







Each of the undersigned represents
that he, she or it is the registered owner of and has the right and legal power to execute
this written consent with respect to the number of issued and outstanding shares of the
capital of the Company held by him, her or it and that each person signing his or her name
below in a representative capacity has the requisite authority so to act. This resolution
may be signed in any number of counterparts, each of which shall be deemed an original and
all of which shall constitute one instrument. 



[THE REMINDER OF THIS
PAGE IS INTETIONALLY LEFT BLANK] 



- 7 -







[Signature Page March 2006 General
Meeting]  



IN WITNESS WHEREOF, we affix our
signatures hereto as of the date set forth above. 



			
			
			
			
			
	
	
	

	Gad Neumann	David Alumot	Pitango Venture Capital Fund III
	 	 	(Israeli Sub) L.P.
	 
	
	
	

	Pitango Venture Capital Fund III	Pitango Venture Capital Fund III	Pitango JP Morgan Fund III
	(Israeli Sub.) Non-Q L.P.	(Israeli Investors) L.P.	(Israel), L.P.
	 
	
	
	

	Pitango Principles Fund III	Pitango Venture Capital Fund III	Canada Israel Opportunity Fund
	(Israel) L.P.	Trusts 2000 L.P.	III, L.P.
	 
	
	
	

	Shrem, Fudim, Kelner Founders	Shrem Fudim Kelner & Co. Ltd.	Qualitau Ltd.
	Group II L.P.
	 
	
	
	

	SVE Star Ventures Enterprises Gmbh	Star Management of Investments	Star Growth Enterprise, a German
	& Co. No. IX KG.	No. II (2000) L.P.	Civil Law Partnership (with
	 	 	limitation of liability)
	 
	
	
	

	SVM Star Ventures	Lehman Brothers Holdings plc (on	Lehman Brothers Partnership
	Managementgesellschaft mbH Nr. 3	behalf of pre-tax plan)	Account 2000/2001, L.P.
	 
	
	
	

	Lehman Brothers European Venture	Lehman Brothers Offshore	Orbotech Technology Ventures L.P.
	Capital L.P.	Partnership Account 2000/2001,
	 	L.P.
	 
	
	
	

	Intel Atlantic, Inc.	Genesis Partners II, L.D.C.	Genesis Partners II (Israel),
	 	 	L.P.
	 
	
	
	

	Poalim Ventures Ltd.	Poalim Ventures I Ltd.	Poalim Ventures II L.P.
	 
	
	
	

	FINANCIERE SESO S.A.	Inter Hightech (1982) Ltd.	Eliyahu Lerner, CPA (as trustee)
	 	(Previously TICI)









- 8 -







Schedule 1.4(a)(ii)  








			
			
			
	SHARES XXX	 	NUMBER BB3-XXX
	 	 	 
		NEGEVTECH LTD. 	
	 	 	 
	Share Certificate  	 
	 	 	 
	
This is to certify that

       [Shareholder]





Is the Registered Holder of                   XXX



Preferred BB-3 Shares of par value NIS 0.01 each,



Numbered                                         XXX - XXX



Inclusive, fully paid up in the above named Company, subject to



The Memorandum and Articles of Association of the Company.  	 
	 	 Given under the Company's Stamp



This __th day of ___, 2006 	 
	 	 	 
	——————————————

DIRECTOR	COMPANY STAMP	——————————————

 DIRECTOR
	 	 	 

















Schedule 1.4(a)(iii)  




Written Resolution of the Board of Directors of

Negevtech Ltd.

Adopted by Unanimous Written Consent

Effective as of February 28, 2006 




The undersigned, constituting all of
the members of the Board of Directors of the Company (the “Board”),
hereby adopt the following resolution by way of unanimous written consent in lieu of
holding a formal meeting on the above date and hereby waive any notice whatsoever in
connection therewith: 



	1.  	Changes
in Share Capital  






        In
connection with the closing of the Company’s proposed issuance of Series BB-3
Preferred Shares (the first of such closings, if there will be more than one, the
“Closing” and the “Financing”, respectively) it is
necessary to make certain changes to the Company’s registered (authorized) and
unissued and registered and issued share capital. Accordingly, the Board resolved, to
approve, and to recommend to the Company’s shareholders to approve the following
resolutions: 



	 	1.1.	Increase
of Registered Share Capital and Creation of New Class of Shares;
                    Amendment of Memorandum of Association and Articles of
Association






	 	
Resolved,
to approve, and to recommend to the Company’s shareholders to approve, all subject
to and effective immediately prior to the Closing, to increase the registered share
capital of the Company by NIS 100,000 divided into (i) 5,000,000 newly created Series
BB-3 Preferred Shares nominal value NIS 0.01 each (“Series BB-3 Preferred Shares”)
and (ii) 5,000,000 Ordinary Shares nominal value NIS 0.01 each, and to amend the
Memorandum of Association and Articles of Association of the Company accordingly.  






	 	
The
powers, preferences, rights and restrictions of the Series BB-3 Preferred Shares and
other matters relating thereto shall be as set forth from time to time in the Articles of
Association of the Company.  






	  	1.2.  	Conversion
of Shares Held by Genesis Entities  






	 	
In
connection with the Financing, Series BB-1 Preferred Shares issued in January 2006 upon
the deferred closing of the previous financing (the Poalim financing) to Genesis entities
(an aggregate number of 862,292 Preferred BB-1 Shares) shall be converted into the new
class of Series BB-3 Preferred Shares.  






	 	
RESOLVED,
to approve, and to recommend to the Company’s shareholders to authorize and approve,
all subject to and effective immediately prior to the Closing, the conversion of 751,400
BB-1 Preferred Shares held by Genesis Partners II, L.D.C. and 110,892 BB-1 Preferred
Shares held by Genesis Partners II (Israel), L.P. into the same number (i.e., on a one
for one basis) of fully paid and non-assessable BB-3 Preferred Shares,  














	 	1.3 	Summary;
Authorization to sign and deliver notices; General






	 	
Accordingly,
effective immediately following the increase of share capital provided for in item 1.1
above and the conversion of shares held by Genesis entities provided for in item 1.2
above and immediately following the Closing, the registered (authorized) share capital of
the Company will be NIS 855,700 divided into:  






	 	
(a)
          47,000,996 Ordinary Shares of which 428,949 will be issued and outstanding;  






	 	
(b)
          1,569,004 Ordinary-Preferred Shares of which all will be issued and
outstanding;  






	 	
(c)
          15,000,000 Series AA Preferred Shares of which 13,144,070 will be issued and
          outstanding;  






	 	
(d)
          12,137,708 Series BB-1 Preferred Shares of which 8,152,256 will be issued and
          outstanding;  






	 	
(e)
          4,000,000 Series BB-2 Preferred Shares of which 3,597,106 will be issued and
          outstanding; and  






	 	
(f)
          5,862,292 Series BB-3 Preferred Shares of which 5,604,898 will be issued and
          outstanding.  






	 	
The
powers, preferences, rights and restrictions of which and other matters relating thereto
shall be as set forth from time to time in the Articles of Association of the Company.  






	 	
Resolved,
to authorize each of the Company’s directors to sign and deliver any notices
required with respect to the above to the Registrar of Companies in the name of the
Company and on its behalf.  






	 	
The
directors are aware of the interest of the director appointed by Genesis (as such term is
defined in the Articles of Association of the Company), in item 1.2 above.  






	2.  	Adoption
of New Articles of Association  






	 	
Resolved,
all subject to and effective immediately prior to the Closing, to approve and adopt, and
to recommend to the Company’s shareholders to approve and adopt the New Articles of
Association attached hereto as Exhibit A (the “New
Articles”), as the Articles of Association of the Company, such New Articles to
be filed by the Company with the Companies Registrar, in place of the current Articles of
Association. 






	 	
Resolved,
to authorize each of the Company’s directors to sign and deliver any notices required
with respect to the above to the Registrar of Companies in the name of the Company and on
its behalf. 






	 	
The
directors acknowledge that they are aware of the interests of the directors of the Company
in the New Articles, either as grantees of special rights pursuant thereto or due to their
interests in grantees of special rights pursuant thereto. 






- 2 -







     	3.	
          Approval of Share Purchase Agreement and Amendment to Shareholders Rights
          Agreement;  Authorization of Sale and Issuance of Shares; General
          Authorization and Approval 


          



	 	
Resolved,
to approve, and to recommend to the Company’s shareholders to approve, all subject
to and effective immediately prior to the Closing, the following:  






	 	3.1. 	That
certain Series BB Preferred Share Purchase Agreement, between the Company
                    and the Investors, as defined therein, with respect to the Financing,
                    substantially in the form attached hereto as Exhibit B,
for                     the sale of up to 4,742,606 Series BB-3 Preferred Shares to
certain Investors                     (the “Share Purchase Agreement”)
including, the execution,                     delivery and performance of the Share
Purchase Agreement, the consummation of                     the transactions provided for
therein and the performance by the Company of its                     obligations
thereunder, including, inter alia, the issuance and sale of such
                    Series BB-3 Preferred Shares (the “Series BB-3 Preferred
                    Shares”) and any shares issuable upon the conversion
thereof, all of                     the above without need for any further act, approval
or authority of the                     Company’s Board of Directors, of the
Shareholders or of the Company, and                     all ancillary transactions,
documents, schedules and exhibits contemplated by                     and/or associated
with the Share Purchase Agreement (whether or not approved                     separately
herein) and to authorize any two of the directors of the Company to
                    execute and deliver the Share Purchase Agreement in the name of the
Company and                     on its behalf, with such changes therein or additions
thereto as such directors                     executing the Share Purchase Agreement
shall approve, with the understanding                     that substantive changes to the
Share Purchase Agreement shall be submitted to                     the Company’s
Board of Directors, and only the Board of Directors, for its                     approval
(such approval deemed to be granted by the shareholders). Such Series
                    BB-3 Preferred Shares, the Ordinary Shares into which such shares may
be                     converted any additional Ordinary Shares issued in connection with
such                     conversion, when issued and paid for (or deemed paid for) in
accordance with the                     provisions of the Share Purchase Agreement and
the New Articles will be duly                     authorized, validly issued, fully paid
and non-assessable. 






	 	3.2. 	That
certain amendment to the Shareholders Rights Agreement, between the Company
                    and the parties thereto, as defined therein, substantially in the
form attached                     hereto as Exhibit C (the “Amendment
toShareholders Rights Agreement”), including, inter alia, the
                    execution, delivery and performance of the Amendment to Shareholders
Rights                     Agreement and to authorize any two of the directors of the
Company to execute                     and deliver the Amendment to Shareholders Rights
Agreement in the name of the                     Company and on its behalf, with such
changes therein or additions thereto as                     such directors executing the
Amendment to Shareholders Rights Agreement shall                     approve with the
understanding that substantive changes to the Amendment to
                    Shareholders Rights Agreement shall be submitted to the Company’s
Board of                     Directors, and only the Board of Directors, for its approval
(such approval                     deemed granted by the shareholders). 






- 3 -







	 	3.3. 	Any
other matter described or set forth in the Share Purchase Agreement and/or
                    the Amendment to Shareholders Rights Agreement which requires the
authorization                     or approval of the Board of Directors or of the
Shareholders of the Company and                     to authorize any two of the directors
of the Company to take such acts and to                     execute such documents in the
name of the Company and on its behalf as may be                     required to implement
the Share Purchase Agreement and/or the Amendment to                     Shareholders
Rights Agreement and the transactions contemplated therein. 






	 	3.4. 	That
the execution, delivery and performance of the Share Purchase Agreement and
                    the Amendment to Shareholders Rights Agreement and the consummation
of the                     transactions provided for therein do not prejudice the best
interests of the                     Company. 






	 	
The
directors acknowledge that they are aware of the interests of certain of the directors of
the Company in the Financing, the Share Purchase Agreement and the Amendment to
Shareholders Rights Agreement, either as direct parties thereto or due to their interests
in parties thereto. 






	4. 	Increase
in Number of Shares Reserved for Purposes of the Company’s           Share Option
Plans






	 	
Resolved,
to approve, and to recommend to the Company’s shareholders to approve, all subject to
and effective immediately following to the Closing: 






	  	 4.1  	Israeli
ESOP 






	 	
To
increase of the number of Ordinary Shares reserved for issuance under the Company’s
Employee Share Ownership and Option Plan (2001, as amended 2003 and 2004) (the “IL
 Plan”) by 750,000 additional Ordinary Shares, thereby bringing the total number
of Ordinary Shares reserved for issuance under the IL Plan to 5,424,503 Ordinary Shares
subject to and immediately following the Closing, comprised of the following: 197,500
Ordinary Shares which have been issued following exercise of options granted to employees
of the Company, 4,313,226 Ordinary Shares subject to outstanding options and 913,777
Ordinary Shares available for future grant.  






	  	4.2  	US
ESOP 






	 	
To
increase of the number of Ordinary Shares reserved for issuance under the Company’s
Employee Share Option Plan (2002) (the “US Plan”) by 175,000 additional
Ordinary Shares, thereby bringing the total number of Ordinary Shares reserved for
issuance under the US Plan to 605,000 Ordinary Shares, subject to and immediately
following the Closing, comprised of the following: 362,000 Ordinary Shares subject to
outstanding options and 243,000 Ordinary Shares available for future grant.  






	  	4.3  	Other
Options 






	 	
It
is clarified that the foregoing does not include options to purchase 120,560 Ordinary
Shares of the Company granted to service providers (including 87,791 options granted to
TICI).  






	 	
The
directors are aware of the interests of the directors of the Company in this matter, as
potential grantees of options pursuant to the Plans. 






- 4 -









	5.  	Grant
of Options to Mr. Rafi Yizhar  






	 	
RESOLVED,
unanimously, to approve, and to recommend to the Company’s shareholders to approve,
the grant to Mr. Rafi Yizhar, a director of the Company, an option to purchase up to
40,000 Ordinary Shares of the Company, nominal value NIS 0.01, at an exercise price of
$0.63, all pursuant to the provisions of the IL Plan and in accordance with the terms and
conditions of an option agreement to be entered into between the Company and Mr. Yizhar,
as customary in the Company. The options shall vest and be exercisable in accordance with
the following schedule: (1) 20,000 options shall vest on 29.9.2007; (ii) 10,000 options
shall vest on 29.9.2008; and (iii) 10,000 options shall vest on 29.9.2009, subject to Mr.
Yizhar’s continued service to the Company. 






	 	
The
directors are aware of the interests of Mr. Yizhar in this matter.  






	6.  	Convening
of General Meeting  






	 	
Resolved,
that general meeting of the shareholders of the Company be convened, for the purpose of
obtaining the approval of the Company’s shareholders to the matters approved above
and any other matters that may lawfully be brought for shareholder approval at such
meeting. 






	 	
It
is further resolved, that any Director of the Company be authorized to determine the time
and place of the above meeting and to send notices thereof to the shareholders, it being
agreed that if all shareholders agree in writing to the above, the meeting may not be
held. 






	7.  	Omnibus
Resolutions  






	 	
Resolved,
to approve, and to recommend to the Company’s shareholders to approve, that any of
the appropriate officers of the Company be, and each of them hereby is, authorized to
prepare, execute, deliver and perform, as the case may be, such agreements, amendments,
applications, approvals, certificates, communications, consents, demands, directions,
documents, further assurances, instruments, notices, orders, requests resolutions,
supplements or undertakings, as each such officer, in his discretion, shall deem necessary
or advisable to carry out the intent and purposes of the foregoing resolutions; and that
the preparation, execution, delivery and performance of any such agreements, amendments,
applications, approvals, certificates, communications, consents, demands, directions,
documents, further assurances, instruments, notices, orders, requests, resolutions,
supplements or undertakings shall be conclusive evidence of the approval of the
Company’s Board of Directors thereof and all matters relating thereto. 






	 	
Resolved,
that any and all actions heretofore taken by the officers of the Company in the name and
on behalf of the Company in furtherance of the preceding resolutions, are hereby ratified,
approved and adopted. 






The signature hereunder of any
director having an interest in any of the items herein is for the purpose of adopting a
resolution in writing. This resolution may be signed in any number of counterparts, each
of which shall be deemed an original and all of which shall constitute one instrument. 



- 5 -







IN WITNESS WHEREOF, we affix our
signatures hereto as of the date set forth above. 



			
			
			
			
			
	___________________	___________________	___________________
	Gad Neumann	Eran Gersht	Aaron Mankovsky
	 
	___________________	___________________	___________________
	Rafi Yizhar	Rani Cohen	Yaffa Krindel
	 
	___________________	___________________
	Eddy Shalev	Arnon Gat






- 6 -








Schedule 1.4(a)(iv)  


Negevtech Ltd.
Share Register (as of March 22, 2006)


Ordinary Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
O1

	
 

	
Financiere
  Seso S.A

	
 

	
Ordinary

	
 

	
159,620

	
 

	
1

	
 

	
159,620

	
 

	
 


	
O2

	
 

	
Inter
  Hightech (1982) Ltd. (Previously TICI)

	
 

	
Ordinary

	
 

	
71,829

	
 

	
159,621

	
 

	
231,449

	
 

	
 


	
O3

	
 

	
Eli Lerner,
  CPA (Trustee)

	
 

	
Ordinary

	
 

	
34,500

	
 

	
231,450

	
 

	
265,949

	
 

	
 


	
O4

	
 

	
Eli Lerner,
  CPA (Trustee)

	
 

	
Ordinary

	
 

	
163,000

	
 

	
265,950

	
 

	
428,949

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
428,949

	
 

	
 

	
 

	
 

	
 

	
 













Negevtech Ltd.
Share Register (as of March 22, 2006)
Ordinary – Preferred Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
OP-1

	
 

	
Gadi Neumann

	
 

	
Ordinary -
  Preferred

	
 

	
784,502

	
 

	
1

	
 

	
784,502

	
 

	
 


	
OP-2

	
 

	
David Alumot

	
 

	
Ordinary -
  Preferred

	
 

	
784,502

	
 

	
784,503

	
 

	
1,569,004

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
1,569,004

	
 

	
 

	
 

	
 

	
 

	
 













Negevtech Ltd.
Share Register (as of March 22, 2006)
Preferred AA Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
PAA-1

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
Preferred AA

	
 

	
2,902,420

	
 

	
1

	
 

	
2,902,420

	
 

	
 


	
PAA-2

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub.) Non-Q L.P.

	
 

	
Preferred AA

	
 

	
268,316

	
 

	
2,902,421

	
 

	
3,170,736

	
 

	
 


	
PAA-3

	
 

	
Pitango
  Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
Preferred AA

	
 

	
784,811

	
 

	
3,170,737

	
 

	
3,955,547

	
 

	
 


	
PAA-4

	
 

	
Pitango JP
  Morgan Fund III (Israel), L.P.

	
 

	
Preferred AA

	
 

	
447,636

	
 

	
3,955,548

	
 

	
4,403,183

	
 

	
 


	
PAA-5

	
 

	
Pitango
  Principles Fund III (Israel) L.P.

	
 

	
Preferred AA

	
 

	
102,165

	
 

	
4,403,184

	
 

	
4,505,348

	
 

	
 


	
PAA-6

	
 

	
Pitango
  Venture Capital Fund II Trusts 2000 L.P.

	
 

	
Preferred AA

	
 

	
204,330

	
 

	
4,505,349

	
 

	
4,709,678

	
 

	
 


	
PAA-7

	
 

	
Canada
  Israel Opportunity Fund III, L.P.

	
 

	
Preferred AA

	
 

	
45,308

	
 

	
4,709,679

	
 

	
4,754,986

	
 

	
 


	
PAA-8

	
 

	
Shrem,
  Fudim, Kelner Founders Group II L.P.

	
 

	
Preferred AA

	
 

	
45,308

	
 

	
4,754,987

	
 

	
4,800,294

	
 

	
 


	
PAA-9

	
 

	
Shrem Fudim
  Kelner & Co. Ltd.

	
 

	
Preferred AA

	
 

	
30,187

	
 

	
4,800,295

	
 

	
4,830,481

	
 

	
 


	
PAA-10

	
 

	
Qualitau
  Ltd.

	
 

	
Preferred AA

	
 

	
355,522

	
 

	
4,830,482

	
 

	
5,186,003

	
 

	
 


	
PAA-11

	
 

	
SVE Star
  Ventures Enterprises Gmbh & Co. No. IX KG.

	
 

	
Preferred AA

	
 

	
2,224,297

	
 

	
5,186,004

	
 

	
7,410,300

	
 

	
 


	
PAA-12

	
 

	
Star
  Management of Investments No. II (2000) L.P.

	
 

	
Preferred AA

	
 

	
321,275

	
 

	
7,410,301

	
 

	
7,731,575

	
 

	
 


	
PAA-13

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred AA

	
 

	
1,773,948

	
 

	
7,731,576

	
 

	
9,505,523

	
 

	
 


	
PAA-14

	
 

	
Genesis
  Partners II (Israel) L.P.

	
 

	
Preferred AA

	
 

	
262,512

	
 

	
9,505,524

	
 

	
9,768,035

	
 

	
 


	
PAA-15

	
 

	
Lehman
  Brothers European Venture Capital L.P.

	
 

	
Preferred AA

	
 

	
222,108

	
 

	
9,768,036

	
 

	
9,990,143

	
 

	
 


	
PAA-16

	
 

	
Lehman
  Brothers Holdings plc (on behalf of pre-tax plan)

	
 

	
Preferred AA

	
 

	
425,109

	
 

	
9,990,144

	
 

	
10,415,252

	
 

	
 


	
PAA-17

	
 

	
Lehman
  Brothers Partnership Account 2000/2001, L.P.

	
 

	
Preferred AA

	
 

	
191,536

	
 

	
10,415,253

	
 

	
10,606,788

	
 

	
 


	
PAA-18

	
 

	
Lehman
  Brothers Offshore Partnership Account 2000/2001, L.P.

	
 

	
Preferred AA

	
 

	
49,677

	
 

	
10,606,789

	
 

	
10,656,465

	
 

	
 


	
PAA-19

	
 

	
Orbotech
  Technology Ventures L.P.

	
 

	
Preferred AA

	
 

	
1,776,860

	
 

	
10,656,466

	
 

	
12,433,325

	
 

	
 


	
PAA-20

	
 

	
Intel
  Atlantic, Inc.

	
 

	
Preferred AA

	
 

	
710,745

	
 

	
12,433,326

	
 

	
13,144,070

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
13,144,070

	
 

	
 

	
 

	
 

	
 

	
 













Negevtech Ltd.

Share Register (as of March 22, 2006)

Preferred BB-1 Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
PBB1-1

	
 

	
Poalim
  Ventures Ltd

	
 

	
Preferred
  BB-1

	
 

	
381,027

	
 

	
1

	
 

	
381,027

	
 

	
 


	
PBB1-2

	
 

	
Poalim
  Ventures I Ltd

	
 

	
Preferred
  BB-1

	
 

	
586,194

	
 

	
381,028

	
 

	
967,221

	
 

	
 


	
PBB1-3

	
 

	
Poalim
  Ventures II  L.P.

	
 

	
Preferred
  BB-1

	
 

	
1,188,509

	
 

	
967,222

	
 

	
2,155,730

	
 

	
 


	
PBB1-4

	
 

	
SVE Star
  Ventures Enterprises Gmbh & Co. No. IX KG.

	
 

	
Preferred
  BB-1

	
 

	
521,206

	
 

	
2,155,731

	
 

	
2,676,936

	
 

	
 


	
PBB1-5

	
 

	
Star
  Management of Investments No. II (2000) L.P.

	
 

	
Preferred
  BB-1

	
 

	
56,238

	
 

	
2,676,937

	
 

	
2,733,174

	
 

	
 


	
PBB1-6

	
 

	
Star Growth
  Enterprise, a German Civil Law Partnership (with limitation of Liability)

	
 

	
Preferred BB-1

	
 

	
2,247,164

	
 

	
2,733,175

	
 

	
4,980,338

	
 

	
 


	
PBB1-7

	
 

	
SVM Star
  Ventures Managmenttgesellschaft mbH Nr. 3

	
 

	
Preferred
  BB-1

	
 

	
334,236

	
 

	
4,980,339

	
 

	
5,314,574

	
 

	
 


	
PBB1-8

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred
  BB-1

	
 

	
693,952

	
 

	
5,314,575

	
 

	
6,008,526

	
 

	
 


	
PBB1-9

	
 

	
Genesis Partners
  II (Israel) L.P.

	
 

	
Preferred
  BB-1

	
 

	
102,414

	
 

	
6,008,527

	
 

	
6,110,940

	
 

	
 


	
PBB1-10

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
Preferred
  BB-1

	
 

	
1,377,123

	
 

	
6,110,941

	
 

	
7,488,063

	
 

	
 


	
PBB1-11

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub.) Non-Q L.P.

	
 

	
Preferred
  BB-1

	
 

	
127,309

	
 

	
7,488,064

	
 

	
7,615,372

	
 

	
 


	
PBB1-12

	
 

	
Pitango
  Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
Preferred
  BB-1

	
 

	
372,373

	
 

	
7,615,373

	
 

	
7,987,745

	
 

	
 


	
PBB1-13

	
 

	
Pitango
  Principles Fund III (Israel) L.P.

	
 

	
Preferred
  BB-1

	
 

	
48,474

	
 

	
7,987,746

	
 

	
8,036,219

	
 

	
 


	
PBB1-14

	
 

	
Pitango
  Venture Capital Fund II Trusts 2000 L.P.

	
 

	
Preferred
  BB-1

	
 

	
96,949

	
 

	
8,036,220

	
 

	
8,133,168

	
 

	
 


	
PBB1-15

	
 

	
Canada
  Israel Opportunity Fund III, L.P.

	
 

	
Preferred
  BB-1

	
 

	
9,544

	
 

	
8,133,169

	
 

	
8,142,712

	
 

	
 


	
PBB1-16

	
 

	
Shrem,
  Fudim, Kelner Founders Group II L.P.

	
 

	
Preferred
  BB-1

	
 

	
9,544

	
 

	
8,142,713

	
 

	
8,152,256

	
 

	
 


	
PBB1-17

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred
  BB-1

	
 

	
751,400

	
 

	
8,152,257

	
 

	
8,903,656

	
 

	
Cancelled -
  Conversion to BB3-16


	
PBB1-18

	
 

	
Genesis
  Partners II (Israel) L.P.

	
 

	
Preferred
  BB-1

	
 

	
110,892

	
 

	
8,903,657

	
 

	
9,014,548

	
 

	
Cancelled -
  Conversion to BB3-17


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
8,152,256

	
 

	
 

	
 

	
 

	
 

	
 













Negevtech Ltd.

Share Register (as of March 22, 2006)

Preferred BB-2 Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
PBB2-1

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
Preferred
  BB-2

	
 

	
861,590

	
 

	
1

	
 

	
861,590

	
 

	
 


	
PBB2-2

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub.) Non-Q L.P.

	
 

	
Preferred
  BB-2

	
 

	
79,650

	
 

	
861,591

	
 

	
941,240

	
 

	
 


	
PBB2-3

	
 

	
Pitango
  Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
Preferred
  BB-2

	
 

	
233,002

	
 

	
941,241

	
 

	
1,174,242

	
 

	
 


	
PBB2-4

	
 

	
Pitango
  Principles Fund III (Israel) L.P.

	
 

	
Preferred
  BB-2

	
 

	
30,332

	
 

	
1,174,243

	
 

	
1,204,574

	
 

	
 


	
PBB2-5

	
 

	
Pitango
  Venture Capital Fund II Trusts 2000 L.P.

	
 

	
Preferred
  BB-2

	
 

	
60,660

	
 

	
1,204,575

	
 

	
1,265,234

	
 

	
 


	
PBB2-6

	
 

	
Canada
  Israel Opportunity Fund III, L.P.

	
 

	
Preferred
  BB-2

	
 

	
7,308

	
 

	
1,265,235

	
 

	
1,272,542

	
 

	
 


	
PBB2-7

	
 

	
Shrem,
  Fudim, Kelner Founders Group II L.P.

	
 

	
Preferred
  BB-2

	
 

	
7,209

	
 

	
1,272,543

	
 

	
1,279,751

	
 

	
 


	
PBB2-8

	
 

	
Shrem Fudim
  Kelner & Co. Ltd.

	
 

	
Preferred
  BB-2

	
 

	
4,932

	
 

	
1,279,752

	
 

	
1,284,683

	
 

	
 


	
PBB2-9

	
 

	
SVE Star
  Ventures Enterprises Gmbh & Co. No. IX KG.

	
 

	
Preferred
  BB-2

	
 

	
635,475

	
 

	
1,284,684

	
 

	
1,920,158

	
 

	
 


	
PBB2-10

	
 

	
Star
  Management of Investments No. II (2000) L.P.

	
 

	
Preferred BB-2

	
 

	
68,535

	
 

	
1,920,159

	
 

	
1,988,693

	
 

	
 


	
PBB2-11

	
 

	
Star Growth
  Enterprise, a German Civil Law Partnership (with limitation of Liability)

	
 

	
Preferred
  BB-2

	
 

	
1,045,227

	
 

	
1,988,694

	
 

	
3,033,920

	
 

	
 


	
PBB2-12

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred
  BB-2

	
 

	
490,760

	
 

	
3,033,921

	
 

	
3,524,680

	
 

	
 


	
PBB2-13

	
 

	
Genesis
  Partners II (Israel) L.P.

	
 

	
Preferred
  BB-2

	
 

	
72,426

	
 

	
3,524,681

	
 

	
3,597,106

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
3,597,106

	
 

	
 

	
 

	
 

	
 

	
 













Negevtech Ltd.

Share Register (as of March 22, 2006)

Preferred BB-3 Shares


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Cert

	
 

	
Shareholder

	
 

	
Series

	
 

	
# of Shares

	
 

	
From

	
 

	
To

	
 

	
Notes


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	




	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
PBB3-1

	
 

	
SVE Star
  Ventures Enterprises GmbH & Co. No. IX KG.

	
 

	
Preferred
  BB-3

	
 

	
79,061

	
 

	
1

	
 

	
79,061

	
 

	
 


	
PBB3-2

	
 

	
Star
  Management of Investment No. II (2000) L.P.

	
 

	
Preferred
  BB-3

	
 

	
8,530

	
 

	
79,062

	
 

	
87,591

	
 

	
 


	
PBB3-3

	
 

	
Star Growth
  Enterprise, a German Civil Law Partnership (with limitation of Liability)

	
 

	
Preferred
  BB-3

	
 

	
181,876

	
 

	
87,592

	
 

	
269,467

	
 

	
 


	
PBB3-4

	
 

	
Poalim
  Ventures Ltd.

	
 

	
Preferred
  BB-3

	
 

	
47,628

	
 

	
269,468

	
 

	
317,095

	
 

	
 


	
PBB3-5

	
 

	
Poalim
  Ventures I Ltd.

	
 

	
Preferred
  BB-3

	
 

	
73,274

	
 

	
317,096

	
 

	
390,369

	
 

	
 


	
PBB3-6

	
 

	
Poalim
  Ventures II L.P.

	
 

	
Preferred
  BB-3

	
 

	
148,564

	
 

	
390,370

	
 

	
538,933

	
 

	
 


	
PBB3-7

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred
  BB-3

	
 

	
234,812

	
 

	
538,934

	
 

	
773,745

	
 

	
 


	
PBB3-8

	
 

	
Genesis
  Partners II (Israel) L.P.

	
 

	
Preferred
  BB-3

	
 

	
34,654

	
 

	
773,746

	
 

	
808,399

	
 

	
 


	
PBB3-9

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
Preferred
  BB-3

	
 

	
183,505

	
 

	
808,400

	
 

	
991,904

	
 

	
 


	
PBB3-10

	
 

	
Pitango
  Venture Capital Fund III (Israeli Sub) Non-Q L.P.

	
 

	
Preferred
  BB-3

	
 

	
16,964

	
 

	
991,905

	
 

	
1,008,868

	
 

	
 


	
PBB3-11

	
 

	
Pitango
  Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
Preferred
  BB-3

	
 

	
49,619

	
 

	
1,008,869

	
 

	
1,058,487

	
 

	
 


	
PBB3-12

	
 

	
Pitango
  Principles Fund III (Israel) L.P.

	
 

	
Preferred
  BB-3

	
 

	
6,460

	
 

	
1,058,488

	
 

	
1,064,947

	
 

	
 


	
PBB3-13

	
 

	
Pitango Venture
  Capital Fund II Trusts 2000 L.P.

	
 

	
Preferred
  BB-3

	
 

	
12,918

	
 

	
1,064,948

	
 

	
1,077,865

	
 

	
 


	
PBB3-14

	
 

	
Intel
  Atlantic, Inc.

	
 

	
Preferred
  BB-3

	
 

	
474,261

	
 

	
1,077,866

	
 

	
1,552,126

	
 

	
 


	
PBB3-15

	
 

	
Wellington
  Partners Venture III Technology Fund L.P.

	
 

	
Preferred
  BB-3

	
 

	
3,190,480

	
 

	
1,552,127

	
 

	
4,742,606

	
 

	
 


	
PBB3-16

	
 

	
Genesis
  Partners II, L.D.C.

	
 

	
Preferred
  BB-3

	
 

	
751,400

	
 

	
4,742,607

	
 

	
5,494,006

	
 

	
 


	
PBB3-17

	
 

	
Genesis
  Partners II (Israel) L.P.

	
 

	
Preferred
  BB-3

	
 

	
110,892

	
 

	
5,494,007

	
 

	
5,604,898

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Total

	
 

	
 

	
 

	
 

	
 

	
5,604,898

	
 

	
 

	
 

	
 

	
 

	
 

















Schedule 1.4(d)  



Date: _____________                      



	To:  	The
Research Committee

The Office of the Chief Scientist

PO Box 2197

Jerusalem, 91021 












Relating to projects that have been
financed by or are currently being financed by the Office of the Chief Scientist of the
Ministry of Industry, Trade and Labor (the “OCS”) and to projects of the
Company (as this term is defined below) that may be financed by the OCS in the future (the
“Projects”). 



UNDERTAKING  



The undersigned, [________________],
a [company/partnership] incorporated, organized and existing under the laws of
[______________] and whose registered offices is at [____________________________],
having, by an agreement dated March 2006, committed to invest in Negevtech Ltd., an
Israeli company (the “Company”), in exchange for ___________ Preferred
BB3 Shares par value NIS 0.01 each of the Company; 



Recognizing that the Company’s
research and development Projects are currently, have been or will be financially
supported by the Government of the State of Israel through the OCS under and subject to
the provisions of The Encouragement of Research and Development in Industry Law 5744-1984
(the “R&D Law”) and the regulations, rules and procedures promulgated
thereunder; and 



Recognizing that the R&D Law
places strict constraints on the transfer of know-how and/or production rights, making all
such transfers subject to the absolute discretion of the OCS’ research committee (the
“Research Committee”), acting in accordance with the aims of the R&D
Law and requiring that any such transfer receive the prior written approval of the
Research Committee; 



HEREBY UNDERTAKE, 



To observe strictly all the
requirements of the R&D Law and the regulations, rules and procedures promulgated
thereunder, as applied to the Company and as directed by the Research Committee, in
particular those requirements stipulated under Section 19, 19A and 19B of the R&D Law
relating to the prohibitions on the transfer of know-how and/or production rights. 



As a shareholder of the Company, to
make all reasonable efforts that the Company shall not be in breach of the requirements of
the R&D Law and the regulations, rules and procedures promulgated thereunder, as
applied to the Company and as directed by the Research Committee, in particular those
requirements stipulated under Sections 19, 19A and 19B of the R&D Law relating to the
prohibitions on the transfer of know-how and/or production rights. 



Nothing herein shall be deemed as an
assumption by the undersigned of any of the obligations of the Company. 


		
	By:	______________________
	 
	Name:	______________________
	 
	Title:	______________________
















Schedule 2.1  


Work Plan 2006-2007


[***] 




*** Text omitted and filed separately with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4).












Schedule 2.2  


Negevtech Ltd.

Series BB Preferred Shares Financing

Capitalization Table Immediately Prior To Closing (1)(2)


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Name

	
 

	
# Ordinary

	
 

	
# Warrants to purchase Ordinary

	
 

	
# Ordinary-Preferred

	
 

	
# Ordinary (Ordinary-Preferred Shares adjustment upon
  conversation)

	
 

	
# Preferred AA

	
 

	
# Warrants to purchase Preferred AA

	
 

	
# Preferred BB-2 (including 15% discount)

	
 

	
# Preferred BB-1

	
 

	
# Preferred BB-1 (Bridge Loans)

	
 

	
# Warrants to purchase Preferred BB-1

	
 

	
# Total Shares on an as converted basis

	
 

	
% Issued & Outstanding on an as converted basis

	
 

	
# Total Fully Diluted on an as converted basis

	
 

	
% Fully Diluted on an as converted basis

	
 


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Gadi Neumann

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
784,502

	
 

	
 

	
433,668

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,218,170

	
 

	
 

	
4.26

	
%

	
 

	
1,218,170

	
 

	
 

	
3.30

	
%


	
David Alumot

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
784,502

	
 

	
 

	
433,668

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,218,170

	
 

	
 

	
4.26

	
%

	
 

	
1,218,170

	
 

	
 

	
3.30

	
%


	
Pitango Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,902,420

	
 

	
 

	
201,465

	
 

	
 

	
861,590

	
 

	
 

	
146,804

	
 

	
 

	
1,230,319

	
 

	
 

	
 

	
 

	
 

	
5,141,133

	
 

	
 

	
17.96

	
%

	
 

	
5,342,597

	
 

	
 

	
14.49

	
%


	
Pitango Venture Capital Fund III (Israeli Sub.) Non-Q L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
268,316

	
 

	
 

	
18,624

	
 

	
 

	
79,650

	
 

	
 

	
13,571

	
 

	
 

	
113,738

	
 

	
 

	
 

	
 

	
 

	
475,275

	
 

	
 

	
1.66

	
%

	
 

	
493,899

	
 

	
 

	
1.34

	
%


	
Pitango Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
784,811

	
 

	
 

	
54,475

	
 

	
 

	
233,002

	
 

	
 

	
39,696

	
 

	
 

	
332,677

	
 

	
 

	
 

	
 

	
 

	
1,390,185

	
 

	
 

	
4.86

	
%

	
 

	
1,444,660

	
 

	
 

	
3.92

	
%


	
Pitango JP Morgan Fund III (Israel), L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
447,636

	
 

	
 

	
36,734

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
447,636

	
 

	
 

	
1.56

	
%

	
 

	
484,371

	
 

	
 

	
1.31

	
%


	
Pitango Principles Fund III (Israel) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
102,165

	
 

	
 

	
7,092

	
 

	
 

	
30,332

	
 

	
 

	
5,167

	
 

	
 

	
43,307

	
 

	
 

	
 

	
 

	
 

	
180,971

	
 

	
 

	
0.63

	
%

	
 

	
188,063

	
 

	
 

	
0.51

	
%


	
Pitango Venture Capital Fund II Trusts 2000 L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
204,330

	
 

	
 

	
14,184

	
 

	
 

	
60,660

	
 

	
 

	
10,335

	
 

	
 

	
86,614

	
 

	
 

	
 

	
 

	
 

	
361,940

	
 

	
 

	
1.26

	
%

	
 

	
376,124

	
 

	
 

	
1.02

	
%


	
Canada Israel Opportunity Fund III, L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
45,308

	
 

	
 

	
2,520

	
 

	
 

	
7,308

	
 

	
 

	
 

	
 

	
 

	
9,544

	
 

	
 

	
 

	
 

	
 

	
62,160

	
 

	
 

	
0.22

	
%

	
 

	
64,680

	
 

	
 

	
0.18

	
%


	
Shrem, Fudim, Kelner Founders Group II L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
45,308

	
 

	
 

	
2,520

	
 

	
 

	
7,209

	
 

	
 

	
 

	
 

	
 

	
9,544

	
 

	
 

	
 

	
 

	
 

	
62,060

	
 

	
 

	
0.22

	
%

	
 

	
64,580

	
 

	
 

	
0.18

	
%


	
Shrem Fudim Kelner & Co. Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
30,187

	
 

	
 

	
1,679

	
 

	
 

	
4,932

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
35,119

	
 

	
 

	
0.12

	
%

	
 

	
36,798

	
 

	
 

	
0.10

	
%


	
Qualitau Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
355,522

	
 

	
 

	
26,879

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
355,522

	
 

	
 

	
1.24

	
%

	
 

	
382,401

	
 

	
 

	
1.04

	
%


	
SVE Star Ventures Enterprises Gmbh & Co. No. IX KG.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,224,297

	
 

	
 

	
318,075

	
 

	
 

	
635,475

	
 

	
 

	
5,293

	
 

	
 

	
515,913

	
 

	
 

	
 

	
 

	
 

	
3,380,979

	
 

	
 

	
11.81

	
%

	
 

	
3,699,054

	
 

	
 

	
10.03

	
%


	
Star Management of Investments No. II (2000) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
321,275

	
 

	
 

	
45,943

	
 

	
 

	
68,535

	
 

	
 

	
571

	
 

	
 

	
55,667

	
 

	
 

	
 

	
 

	
 

	
446,049

	
 

	
 

	
1.56

	
%

	
 

	
491,992

	
 

	
 

	
1.33

	
%


	
Star Growth Enterprise, a German Civil Law Partnership (with
  limitation of Liability)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,045,227

	
 

	
 

	
1,813,653

	
 

	
 

	
433,511

	
 

	
 

	
 

	
 

	
 

	
3,292,391

	
 

	
 

	
11.50

	
%

	
 

	
3,292,391

	
 

	
 

	
8.93

	
%


	
SVM Star Ventures Managmenttgesellschaft mbH Nr. 3

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
334,236

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
334,236

	
 

	
 

	
1.17

	
%

	
 

	
334,236

	
 

	
 

	
0.91

	
%


	
Genesis Partners II, L.D.C.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,773,948

	
 

	
 

	
253,679

	
 

	
 

	
490,760

	
 

	
 

	
1,029,418

	
 

	
 

	
415,934

	
 

	
 

	
 

	
 

	
 

	
3,710,060

	
 

	
 

	
12.96

	
%

	
 

	
3,963,738

	
 

	
 

	
10.75

	
%


	
Genesis Partners II (Israel) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
262,512

	
 

	
 

	
37,535

	
 

	
 

	
72,426

	
 

	
 

	
151,922

	
 

	
 

	
61,384

	
 

	
 

	
 

	
 

	
 

	
548,244

	
 

	
 

	
1.92

	
%

	
 

	
585,779

	
 

	
 

	
1.59

	
%


	
Lehman Brothers European Venture Capital L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
222,108

	
 

	
 

	
41,998

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
222,108

	
 

	
 

	
0.78

	
%

	
 

	
264,106

	
 

	
 

	
0.72

	
%


	
Lehman Brothers Holdings plc (on behalf of pre-tax plan)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
425,109

	
 

	
 

	
80,384

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
425,109

	
 

	
 

	
1.49

	
%

	
 

	
505,493

	
 

	
 

	
1.37

	
%


	
Lehman Brothers Partnership Account 2000/2001, L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
191,536

	
 

	
 

	
36,217

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
191,536

	
 

	
 

	
0.67

	
%

	
 

	
227,754

	
 

	
 

	
0.62

	
%


	
Lehman Brothers Offshore Partnership Account 2000/2001,
L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
49,677

	
 

	
 

	
9,393

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
49,677

	
 

	
 

	
0.17

	
%

	
 

	
59,070

	
 

	
 

	
0.16

	
%


	
Orbotech Technology Ventures L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,776,860

	
 

	
 

	
335,988

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,776,860

	
 

	
 

	
6.21

	
%

	
 

	
2,112,848

	
 

	
 

	
5.73

	
%


	
Intel Atlantic, Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
710,745

	
 

	
 

	
134,395

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
710,745

	
 

	
 

	
2.48

	
%

	
 

	
845,140

	
 

	
 

	
2.29

	
%


	
Poalim Ventures Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
381,027

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
381,027

	
 

	
 

	
1.33

	
%

	
 

	
381,027

	
 

	
 

	
1.03

	
%


	
Poalim Ventures I Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
586,194

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
586,194

	
 

	
 

	
2.05

	
%

	
 

	
586,194

	
 

	
 

	
1.59

	
%


	
Poalim Ventures II L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,188,509

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,188,509

	
 

	
 

	
4.15

	
%

	
 

	
1,188,509

	
 

	
 

	
3.22

	
%


	
Financiere Seso S.A

	
 

	
 

	
159,620

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
159,620

	
 

	
 

	
0.56

	
%

	
 

	
159,620

	
 

	
 

	
0.43

	
%


	
Inter Hightech (1982) Ltd. (Previously TICI)

	
 

	
 

	
71,829

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
71,829

	
 

	
 

	
0.25

	
%

	
 

	
71,829

	
 

	
 

	
0.19

	
%


	
Service Providers

	
 

	
 

	
 

	
 

	
 

	
32,769

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
0.00

	
%

	
 

	
32,769

	
 

	
 

	
0.09

	
%


	
TICI

	
 

	
 

	
 

	
 

	
 

	
87,791

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
0.00

	
%

	
 

	
87,791

	
 

	
 

	
0.24

	
%


	
ESOP IL Plan(1)(2)

	
 

	
 

	
197,500

	
 

	
 

	
4,477,003

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
197,500

	
 

	
 

	
0.69

	
%

	
 

	
4,674,503

	
 

	
 

	
12.68

	
%


	
ESOP US Plan

	
 

	
 

	
 

	
 

	
 

	
430,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
 

	
0.00

	
%

	
 

	
430,000

	
 

	
 

	
1.17

	
%


	
Plenus Technologies Ltd

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,556,437

	
 

	
 

	
 

	
 

	
 

	
0.00

	
%

	
 

	
1,556,437

	
 

	
 

	
4.22

	
%


	
 

	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 


	
Total

	
 

	
 

	
428,949

	
 

	
 

	
5,027,563

	
 

	
 

	
1,569,004

	
 

	
 

	
867,336

	
 

	
 

	
13,144,070

	
 

	
 

	
1,659,779

	
 

	
 

	
3,597,106

	
 

	
 

	
5,706,396

	
 

	
 

	
3,308,152

	
 

	
 

	
1,556,437

	
 

	
 

	
28,621,013

	
 

	
 

	
100

	
%

	
 

	
36,864,792

	
 

	
 

	
100

	
%


	
 

	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 

	


	


	
 





(1)
The 197,500 Ordinary Shares are held by Eli Lerner, CPA as trustee under the
Company’s ESOP 


(2)
Includes 1,410,285 options to purchase Ordinary Shares of the Company granted
to Arnon Gat, the Company’s CEO. Such number of Shares includes an Adjustment
(as provided for and defined in Mr. Gat’s employment agreement with the
Company) in connection with an investment of US$25. 









Schedule 2.2(a)  



Negevtech
Ltd.

Capitalization Table (on a fully diluted basis) as of March 22, 2006


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Name

	
 

	
# Ordinary

	
 

	
# Options/Warrants to Purchase Ordinary

	
 

	
# Ordinary-Preferred

	
 

	
# Ordinary (Ordinary-Preferred Shares adjustment upon
  conversation)

	
 

	
# Preferred AA

	
 

	
# Warrants to purchase Preferred AA

	
 

	
# Preferred BB-2 (including 15% discount)

	
 

	
# Preferred BB-1

	
 

	
# Warrants to purchase Preferred BB-1

	
 

	
# Preferred BB-3

	
 

	
# Total Shares on an as converted basis

	
 

	
% Issued & Outstanding on an as converted basis

	
 

	
# Total Fully Diluted on an as converted basis

	
 

	
% Fully Diluted on an as converted basis

	
 


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
Gadi Neumann

	
 

	
 

	
 

	
 

	
 

	
784,502

	
 

	
433,668

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,218,170

	
 

	
3.65

	
%

	
1,218,170

	
 

	
2.86

	
%


	
David Alumot

	
 

	
 

	
 

	
 

	
 

	
784,502

	
 

	
433,668

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,218,170

	
 

	
3.65

	
%

	
1,218,170

	
 

	
2.86

	
%


	
Pitango Venture Capital Fund III (Israeli Sub) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,902,420

	
 

	
201,465

	
 

	
861,590

	
 

	
1,377,123

	
 

	
 

	
 

	
183,505

	
 

	
5,324,638

	
 

	
15.96

	
%

	
5,526,103

	
 

	
12.99

	
%


	
Pitango Venture Capital Fund III (Israeli Sub.) Non-Q L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
268,316

	
 

	
18,624

	
 

	
79,650

	
 

	
127,309

	
 

	
 

	
 

	
16,964

	
 

	
492,240

	
 

	
1.48

	
%

	
510,863

	
 

	
1.20

	
%


	
Pitango Venture Capital Fund III (Israeli Investors) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
784,811

	
 

	
54,475

	
 

	
233,002

	
 

	
372,373

	
 

	
 

	
 

	
49,619

	
 

	
1,439,805

	
 

	
4.32

	
%

	
1,494,279

	
 

	
3.51

	
%


	
Pitango JP Morgan Fund III (Israel), L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
447,636

	
 

	
36,734

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
447,636

	
 

	
1.34

	
%

	
484,371

	
 

	
1.14

	
%


	
Pitango Principles Fund III (Israel) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
102,165

	
 

	
7,092

	
 

	
30,332

	
 

	
48,474

	
 

	
 

	
 

	
6,460

	
 

	
187,430

	
 

	
0.56

	
%

	
194,522

	
 

	
0.46

	
%


	
Pitango Venture Capital Fund II Trusts 2000 L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
204,330

	
 

	
14,184

	
 

	
60,660

	
 

	
96,949

	
 

	
 

	
 

	
12,918

	
 

	
374,858

	
 

	
1.12

	
%

	
389,042

	
 

	
0.91

	
%


	
Canada Israel Opportunity Fund III, L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
45,308

	
 

	
2,520

	
 

	
7,308

	
 

	
9,544

	
 

	
 

	
 

	
 

	
 

	
62,160

	
 

	
0.19

	
%

	
64,680

	
 

	
0.15

	
%


	
Shrem, Fudim, Kelner Founders Group II L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
45,308

	
 

	
2,520

	
 

	
7,209

	
 

	
9,544

	
 

	
 

	
 

	
 

	
 

	
62,060

	
 

	
0.19

	
%

	
64,580

	
 

	
0.15

	
%


	
Shrem Fudim Kelner & Co. Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
30,187

	
 

	
1,679

	
 

	
4,932

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
35,119

	
 

	
0.11

	
%

	
36,798

	
 

	
0.09

	
%


	
Qualitau Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
355,522

	
 

	
26,879

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
355,522

	
 

	
1.07

	
%

	
382,401

	
 

	
0.90

	
%


	
SVE Star Ventures Enterprises Gmbh & Co. No. IX KG.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
2,224,297

	
 

	
318,075

	
 

	
635,475

	
 

	
521,206

	
 

	
 

	
 

	
79,061

	
 

	
3,460,039

	
 

	
10.37

	
%

	
3,778,113

	
 

	
8.88

	
%


	
Star Management of Investments No. II (2000) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
321,275

	
 

	
45,943

	
 

	
68,535

	
 

	
56,238

	
 

	
 

	
 

	
8,530

	
 

	
454,579

	
 

	
1.36

	
%

	
500,521

	
 

	
1.18

	
%


	
Star Growth Enterprise, a German Civil Law Partnership (with
  limitation of Liability)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,045,227

	
 

	
2,247,164

	
 

	
 

	
 

	
181,876

	
 

	
3,474,267

	
 

	
10.41

	
%

	
3,474,267

	
 

	
8.17

	
%


	
SVM Star Ventures Managmenttgesellschaft mbH Nr. 3

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
334,236

	
 

	
 

	
 

	
 

	
 

	
334,236

	
 

	
1.00

	
%

	
334,236

	
 

	
0.79

	
%


	
Genesis Partners II, L.D.C.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,773,948

	
 

	
253,679

	
 

	
490,760

	
 

	
693,952

	
 

	
 

	
 

	
986,212

	
 

	
3,944,872

	
 

	
11.82

	
%

	
4,198,551

	
 

	
9.87

	
%


	
Genesis Partners II (Israel) L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
262,512

	
 

	
37,535

	
 

	
72,426

	
 

	
102,414

	
 

	
 

	
 

	
145,546

	
 

	
582,898

	
 

	
1.75

	
%

	
620,433

	
 

	
1.46

	
%


	
Lehman Brothers European Venture Capital L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
222,108

	
 

	
41,998

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
222,108

	
 

	
0.67

	
%

	
264,106

	
 

	
0.62

	
%


	
Lehman Brothers Holdings plc (on behalf of pre-tax plan)

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
425,109

	
 

	
80,384

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
425,109

	
 

	
1.27

	
%

	
505,493

	
 

	
1.19

	
%


	
Lehman Brothers Partnership Account 2000/2001, L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
191,536

	
 

	
36,217

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
191,536

	
 

	
0.57

	
%

	
227,754

	
 

	
0.54

	
%


	
Lehman Brothers Offshore Partnership Account 2000/2001,
L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
49,677

	
 

	
9,393

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
49,677

	
 

	
0.15

	
%

	
59,070

	
 

	
0.14

	
%


	
Orbotech Technology Ventures L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,776,860

	
 

	
335,988

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,776,860

	
 

	
5.33

	
%

	
2,112,848

	
 

	
4.97

	
%


	
Intel Atlantic, Inc.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
710,745

	
 

	
134,395

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
474,261

	
 

	
1,185,005

	
 

	
3.55

	
%

	
1,319,400

	
 

	
3.10

	
%


	
Poalim Ventures Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
381,027

	
 

	
 

	
 

	
47,628

	
 

	
428,655

	
 

	
1.28

	
%

	
428,655

	
 

	
1.01

	
%


	
Poalim Ventures I Ltd.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
586,194

	
 

	
 

	
 

	
73,274

	
 

	
659,468

	
 

	
1.98

	
%

	
659,468

	
 

	
1.55

	
%


	
Poalim Ventures II L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,188,509

	
 

	
 

	
 

	
148,564

	
 

	
1,337,073

	
 

	
4.01

	
%

	
1,337,073

	
 

	
3.14

	
%


	
Wellington Partners Venture III Technology Fund L.P.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
3,190,480

	
 

	
3,190,480

	
 

	
9.56

	
%

	
3,190,480

	
 

	
7.50

	
%


	
Financiere Seso S.A

	
 

	
159,620

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
159,620

	
 

	
0.48

	
%

	
159,620

	
 

	
0.38

	
%


	
Inter Hightech (1982) Ltd. (Previously TICI)

	
 

	
71,829

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
71,829

	
 

	
0.22

	
%

	
71,829

	
 

	
0.17

	
%


	
Service Providers

	
 

	
 

	
 

	
32,769

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
0.00

	
%

	
32,769

	
 

	
0.08

	
%


	
TICI

	
 

	
 

	
 

	
87,791

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
0.00

	
%

	
87,791

	
 

	
0.21

	
%


	
ESOP IL Plan(1)(2)

	
 

	
197,500

	
 

	
5,227,003

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
197,500

	
 

	
0.59

	
%

	
5,424,503

	
 

	
12.75

	
%


	
ESOP US Plan

	
 

	
 

	
 

	
605,000

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
-

	
 

	
0.00

	
%

	
605,000

	
 

	
1.42

	
%


	
Plenus Technologies Ltd

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
1,556,437

	
 

	
 

	
 

	
-

	
 

	
0.00

	
%

	
1,556,437

	
 

	
3.66

	
%


	
 

	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 


	
Total

	
 

	
428,949

	
 

	
5,952,563

	
 

	
1,569,004

	
 

	
867,336

	
 

	
13,144,070

	
 

	
1,659,779

	
 

	
3,597,106

	
 

	
8,152,256

	
 

	
1,556,437

	
 

	
5,604,898

	
 

	
33,363,618

	
 

	
100

	
%

	
42,532,397

	
 

	
100

	
%


	
 

	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 





(1) The 197,500 Ordinary Shares are held by
Eli Lerner, CPA as trustee under the Company’s ESOP


(2) Includes 1,410,285 options
to purchase Ordinary Shares of the Company granted to Arnon Gat, the Company’s
CEO. Such number of Shares includes an Adjustment (as provided for and defined
in Mr. Gat’s employment agreement with the Company) in connection with an
investment of US$25.















Schedule 2.3  



Negevtech –
Officers and Directors  



Negevtech Ltd.
– Directors 


Eran Gersht

Raanan Cohen

Arnon Gat

Yaffa Krindel

Aaron Mankovsky

Gad Neumann

Eddy Shalev

Rafi Yizhar




Negevtech Ltd. –
Officers 


		
	Arnon Gat	Chief Executive Officer
	Glyn Davies	Corporate VP Marketing
	Oz Desheh	CFO
	Mordechai Gatenio	VP Operations
	Yuval Levin	VP Sales
	Michal Rozenkrantz	VP Human Resources
	Dr. Rivi Sherman	VP Business development
	Dvir Harmelech	VP R&D
	Shmuel Gov	VP Customer Support









Negevtech Inc. 





	 	
 Directors:








	
Arnon Gat

Oz Desheh 









	 	
  Officers:








	
Glyn Davies - President 








Negevtech PTE. Ltd. (Singapore) 




	 	
 Directors:









	
Oz Desheh

Chen Wen Woam Angela 










	 	
 Officers:








	
Oz Desheh 






Negevtech GmbH Dresden 



	 	
 Directors:








	
 Oz Desheh

Markus Kindler










	 	
 Officers:








	
Markus Kindler 
















Negevtech Japan 




	 	
 Directors:







	
 Arnon Gat

Oz Desheh

Roi Shefts












	 	
  Officers:






	
 Roi Shefts - Business Manager











Negevtech Korea1  




	 	
 Directors:







	
Oz Desheh (representative director)

Arnon Gat 













     1
          The subsidiary in Korea is not yet incorporated. 










Schedule 2.8  


	
 

	
 

	
 


	
 

	
Negevtech FAMILY STATUS

	
Version: 1


	
 

	
Status report date:
  15/08/2005

	
 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
STC File #

	
 

	
Title

	
 

	
Negevtech detailed comments

	
 

	
Status

	
 

	
Abstract

	
 

	
Independent claims

	
 

	
Country

	
 

	
Application No.

	
 

	
Issued Patent


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	 

	
44623

	
 

	
METHOD AND
  SYSTEM FOR FAST ON-LINE ELECTRO-OPTICAL DETECTION OF WAFER DEFECTS

	
 

	
Gadi’s basic concept
  patent

	
 

	
Issued

	
 

	
6,693,664  

	
 

	
6,693,664 

	
 

	
USA

	
 

	
 

	
 

	
6,693,664 


	 

	
46509

	
 

	
METHOD AND
  SYSTEM FOR FAST ON-LINE ELECTRO-OPTICAL DETECTION OF WAFER DEFECTS

	
 

	
Gadi’s basic concept patent

	
 

	
Pending - awaiting for
  response from the European Patent Office

	
 

	
 

	
 

	
 

	
 

	
Europe

	
 

	
03250255-1

	
 

	
 


	 

	
46793

	
 

	
METHOD AND
  SYSTEM FOR FAST ON-LINE ELECTRO-OPTICAL DETECTION OF WAFER DEFECTS

	
 

	
Gadi’s basic concept
  patent

	
 

	
Pending - examintation
  requested

	
 

	
 

	
 

	
 

	
 

	
Taiwan

	
 

	
092100777

	
 

	
 


	 

	
47513

	
 

	
METHOD AND
  APPARATUS FOR INSPECTION OF DEFECTS IN A REPETITIVE OBJECT

	
 

	
Gadi’s basic concept
  patent

	
 

	
Published (Feb 2006) -
  waiting for issue

	
 

	
 

	
 

	
 

	
 

	
Israel

	
 

	
153977

	
 

	
 


	 

	
47606

	
 

	
METHOD AND
  SYSTEM FOR FAST ON-LINE ELECTRO-OPTICAL DETECTION OF WAFER DEFECTS

	
 

	
Gadi’s basic concept
  patent

	
 

	
Pending - examintation
  requested

	
 

	
 

	
 

	
 

	
 

	
Japan

	
 

	
2003-7400

	
 

	
 


	 

	
[***]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	


	
 

	
 


	 

	
47607

	
 

	
METHOD AND
  SYSTEM FOR FAST ON-LINE ELECTRO-OPTICAL DETECTION OF WAFER DEFECTS

	
 

	
Gadi’s basic concept
  patent

	
 

	
Pending - A request for
  examination must be filed before January 15, 2008.

	
 

	
 

	
 

	
 

	
 

	
Korea

	
 

	
2003-2671

	
 

	
 








*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 









	
 

	
 

	
 


	
 

	
Negevtech FAMILY STATUS

	
Version: 1


	
 

	
Status report date:
  15/08/2005

	
 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
STC File #

	
 

	
Title

	
 

	
Negevtech detailed comments

	
 

	
Status

	
 

	
Abstract

	
 

	
Independent claims

	
 

	
Country

	
 

	
Application No.

	
 

	
Issued Patent


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	 

	
44420

	
 

	
SYSTEM FOR
  DETECTION OF WAFER DEFECTS

	
 

	
Full description &
  claims on the 302 imaging apparatus - concept claims

	
 

	
Pending - correspondence
  with the examiner. Amendment was sent on Dec 2005

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
10/345,097

	
 

	
 


	 

	
53751

	
 

	
SYSTEM FOR
  DETECTION OF WAFER DEFECTS

	
 

	
Full description &
  claims on the 302 imaging apparatus - Fourier lens claims

	
 

	
Pending - correspondence
  with the examiner. Amendment was sent on Jan 2005

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
11/021,393

	
 

	
 


	 

	
55145

	
 

	
GROUP II
  (Div. Of 44420)

	
 

	
 

	
 

	
Not filed

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55069

	
 

	
GROUP III:
  FOURIER FILTER (Div. of 44420)

	
 

	
 

	
 

	
Not filed

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55247

	
 

	
GROUP IV
  (Div. Of 44420)

	
 

	
 

	
 

	
Not filed

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55070

	
 

	
GROUP V:
  DARK FIELD (Div. of 44420)

	
 

	
 

	
 

	
Not filed

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55071

	
 

	
GROUP VI:
  LASER ILLUMINATION (Div. of 44420)

	
 

	
 

	
 

	
Not filed - will be filed
  soon

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55147

	
 

	
GROUP VII
  (Div. Of 44420)

	
 

	
 

	
 

	
Not filed

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55072

	
 

	
GROUP VIII:
  FIELD CURVATURE (Div. of 44420)

	
 

	
 

	
 

	
Not filed - will be filed
  soon

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
 

	
 

	
 


	 

	
55062

	
 

	
SYSTEM FOR
  DETECTION OF WAFER DEFECTS

	
 

	
Full description &
  claims on the 302 imaging apparatus

	
 

	
Pending - published

	
 

	
 

	
 

	
 

	
 

	
Europe

	
 

	
4701321.4

	
 

	
 


	 

	
50446

	
 

	
SYSTEM FOR
  DETECTION OF WAFER DEFECTS

	
 

	
Full description &
  claims on the 302 imaging apparatus

	
 

	
National phase filed

	
 

	
 

	
 

	
 

	
 

	
PCT

	
 

	
PCT/IL04/000023

	
 

	
 


	 

	
55065

	
 

	
SYSTEM FOR
  DETECTION OF WAFER DEFECTS

	
 

	
Full description &
  claims on the 302 imaging apparatus

	
 

	
Pending - examination was
  not requested

	
 

	
 

	
 

	
 

	
 

	
South Korea

	
 

	
2005-7013165

	
 

	
 


	 

	
[***]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 








*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 









	
 

	
 

	
 


	
 

	
Negevtech FAMILY STATUS

	
Version: 1


	
 

	
Status report date:
  15/08/2005

	
 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
STC File #

	
 

	
Title

	
 

	
Negevtech detailed comments

	
 

	
Status

	
 

	
Abstract

	
 

	
Independent claims

	
 

	
Country

	
 

	
Application No.

	
 

	
Issued Patent


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	 

	
47667

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Issued

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
6,892,013

	
 

	
 


	 

	
54590

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Pending

	
 

	
 

	
 

	
 

	
 

	
USA (Cont.
  of 47667)

	
 

	
11/096,873

	
 

	
 


	 

	
55106

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Pending

	
 

	
 

	
 

	
 

	
 

	
Europe

	
 

	
4701327.1

	
 

	
 


	 

	
50445

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Natinal phase filed

	
 

	
 

	
 

	
 

	
 

	
PCT

	
 

	
PCT/IL04/000022

	
 

	
 


	 

	
55109

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Pending - Examination was
  not requested

	
 

	
 

	
 

	
 

	
 

	
South Korea

	
 

	
2005-7013118

	
 

	
 


	 

	
50532

	
 

	
FIBER
  OPTICAL ILLUMINATION SYSTEM

	
 

	
BF & DF illumination
  system with the coherence breaking technique

	
 

	
Issued

	
 

	
 

	
 

	
 

	
 

	
Taiwan

	
 

	
093101034

	
 

	
 















	
 

	
 

	
 


	
 

	
Negevtech FAMILY STATUS

	
Version: 1


	
 

	
Status report date:
  15/08/2005

	
 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
STC File #

	
 

	
Title

	
 

	
Negevtech detailed comments

	
 

	
Status

	
 

	
Abstract

	
 

	
Independent claims

	
 

	
Country

	
 

	
Application No.

	
 

	
Issued Patent


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	 

	
53885

	
 

	
MULTI MODE
  INSPECTION METHOD AND APPARATUS

	
 

	
FPA that allows simple and
  economical CCD packing+ concept for simultaneous BF&DF

	
 

	
Pending - Correspondence
  with examiner

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
11/176,844

	
 

	
 


	 

	
52169

	
 

	
MULTI MODE
  INSPECTION METHOD AND APPARATUS

	
 

	
FPA that allows simple and
  economical CCD packing+ concept for simultaneous BF&DF

	
 

	
Provisional

	
 

	
 

	
 

	
 

	
 

	
USA -
  provisional

	
 

	
60/587,675

	
 

	
 


	 

	
[***]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	 

	
53886

	
 

	
MULTI MODE
  INSPECTION METHOD AND APPARATUS

	
 

	
FPA that allows simple and
  economical CCD packing+ concept for simultaneous BF&DF

	
 

	
National phase should be
  fined until Jan 2007

	
 

	
 

	
 

	
 

	
 

	
PCT

	
 

	
PCT/IL2005/000708

	
 

	
 


	 

	
53603

	
 

	
METHOD AND
  APPARATUS FOR DETECTING DEFECTS IN WAFERS

	
 

	
Image processing of the
  302

	
 

	
Pending

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
11/069,712

	
 

	
 


	 

	
53603

	
 

	
METHOD AND
  APPARATUS FOR DETECTING DEFECTS IN WAFERS

	
 

	
Image processing of the
  302

	
 

	
Filed on Feb 2006

	
 

	
 

	
 

	
 

	
 

	
Europe

	
 

	
 

	
 

	
 








*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 









	
 

	
 

	
 


	
 

	
Negevtech FAMILY STATUS

	
Version: 1


	
 

	
Status report date:
  15/08/2005

	
 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
STC File #

	
 

	
Title

	
 

	
Negevtech detailed comments

	
 

	
Status

	
 

	
Abstract

	
 

	
Independent claims

	
 

	
Country

	
 

	
Application No.

	
 

	
Issued Patent


	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	


	
 

	



	 

	
[***]

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	 

	
53604

	
 

	
METHOD AND
  APPARATUS FOR DETECTING DEFECTS IN WAFERS INCLUDING ALIGNMENT OF THE WAFER
  IMAGES SO AS TO INDUCE THE SAME SMEAR IN ALL IMAGES

	
 

	
Image processing of the
  302

	
 

	
Pending

	
 

	
 

	
 

	
 

	
 

	
USA

	
 

	
11/068,711

	
 

	
 


	 

	
[***]

	
 

	
 

	
 

	
 

	
 

	


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
Domain Name: negevtech. com

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
Unregistered Trademark: Step&Image

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 








*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 








Schedule 2.18  















[***]



*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 
















Schedule 2.19 



NEGEVTECH LTD.


2005 ANNUAL REPORT
















 NEGEVTECH LTD.


2005 ANNUAL REPORT 


 TABLE OF CONTENTS 


	
 

	
 

	
 


	
   

	
   

	
 Page 


	
   


	
 AUDITORS’ REPORT  

 CONSOLIDATED FINANCIAL STATEMENTS - IN U.S. DOLLARS ($): 

	
   

	
 2 


	
 Balance sheets 

	
   

	
 3 


	
 Statements of
operations 

	
   

	
 4 


	
 Statements of changes in
shareholders’
 equity 

	
   

	
 5–7 


	
 Statements of cash
flows 

	
   

	
 8 


	
 Notes to financial
statements 

	
   

	
 9–26 








	
 


	



	



	















 AUDITORS’
REPORT 


 To the
shareholders of 


NEGEVTECH LTD.  


 We have
audited the consolidated balance sheets of Negevtech Ltd. (hereafter - the
Company) and its subsidiaries as of December 31, 2005 and 2004 and the related
consolidated statements of operations, changes in shareholders’ equity and cash
flows for each of the three years in the period ended December 31, 2005. These
financial statements are the responsibility of the Company’s board of directors
and management. Our responsibility is to express an opinion on these financial
statements based on our audits. 


 We conducted
our audits in accordance with auditing standards generally accepted in Israel,
including those prescribed by the Israeli Auditors (Mode of Performance)
Regulations, 1973. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company’s board of directors and management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. 


 In our
opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
December 31, 2005 and 2004 and the results of its operations, changes in its
shareholder’s equity and cash flows for each of the three years in the period
ended December 31, 2005, in conformity with accounting principles generally
accepted in the United States of America. 


 Kesselman
& Kesselman 

Tel-Aviv, Israel 


2











 NEGEVTECH LTD.


CONSOLIDATED BALANCE SHEETS

(U.S. dollars in thousands) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
   

	
 December 31 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
 Note 

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	


	
   

	


	
   

	


	
   


	
 A s s e t s 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 CURRENT
  ASSETS: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Cash and cash equivalents 

	
   

	
 1 

	
 d 

	
   

	
 1,356 

	
   

	
 254 

	
   


	
 Short-term bank deposits 

	
   

	
   

	
   

	
   

	
   

	
   

	
 32 

	
   


	
 Accounts receivable: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Trade 

	
   

	
   

	
   

	
   

	
 3,219 

	
   

	
 729 

	
   


	
 Government of Israel 

	
   

	
   

	
   

	
   

	
 1,671 

	
   

	
 1,609 

	
   


	
 Other 

	
   

	
 9 

	
 a 

	
   

	
 737 

	
   

	
 288 

	
   


	
 Inventories 

	
   

	
 9 

	
 b 

	
   

	
 17,212 

	
   

	
 10,992 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 T o t a l current assets 

	
   

	
   

	
   

	
   

	
 24,195 

	
   

	
 13,904 

	
   


	
 NON-CURRENT
  ASSET : 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Restricted deposits 

	
   

	
 9 

	
 c 

	
   

	
 1,199 

	
   

	
 1,207 

	
   


	
 Long-term prepaid expenses 

	
   

	
 4 

	
 b 

	
   

	
 722 

	
   

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 T o t a l non-current assets 

	
   

	
   

	
   

	
   

	
 1,921 

	
   

	
 1,207 

	
   


	
 FIXED
  ASSETS: 

	
   

	
 2 

	
   

	
   

	
   

	
   

	
   

	
   


	
 Cost 

	
   

	
   

	
   

	
   

	
 10,061 

	
   

	
 5,271 

	
   


	
 L e s s – accumulated depreciation and
amortization 

	
   

	
   

	
   

	
   

	
 3,325 

	
   

	
 1,487 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
 6,736 

	
   

	
 3,784 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
 32,852 

	
   

	
 18,895 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 Liabilities and shareholders’ equity 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 CURRENT
  LIABILITIES: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Short term loans and current maturities of
long-term bank loan 

	
   

	
 4 

	
   

	
   

	
 833 

	
   

	
 1,076 

	
   


	
 Accounts payable and accruals: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Trade 

	
   

	
   

	
   

	
   

	
 4,730 

	
   

	
 2,854 

	
   


	
 Deferred revenue 

	
   

	
   

	
   

	
   

	
 550 

	
   

	
   

	
   


	
 Other 

	
   

	
 9 

	
 d 

	
   

	
 2,497 

	
   

	
 1,385 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 T o t a l current liabilities 

	
   

	
   

	
   

	
   

	
 8,610 

	
   

	
 5,315 

	
   


	
 LONG-TERM
  LIABILITIES: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Accrued severance pay 

	
   

	
 3 

	
   

	
   

	
 65 

	
   

	
 71 

	
   


	
 Loans and other liabilities, net of current
maturities: 

	
   

	
 4 

	
   

	
   

	
   

	
   

	
   

	
   


	
 Bank loans 

	
   

	
   

	
   

	
   

	
 347 

	
   

	
 1,181 

	
   


	
 Other liabilities 

	
   

	
   

	
   

	
   

	
 7,700 

	
   

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 T o t a l long - term liabilities 

	
   

	
   

	
   

	
   

	
 8,112 

	
   

	
 1,252 

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 CONVERTIBLE
  LOANS FROM SHAREHOLDERS 

	
   

	
 5 

	
   

	
   

	
   

	
   

	
 5,050 

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 COMMITMENTS
  AND CONTINGENT LIABILITIES 

	
   

	
 6 

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
 T o t a l liabilities 

	
   

	
   

	
   

	
   

	
 16,722 

	
   

	
 11,617 

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 SHAREHOLDERS’
  EQUITY 

	
   

	
 8 

	
   

	
   

	
 16,130 

	
   

	
 7,278 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
 32,852 

	
   

	
 18,895 

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   








	
 

	
 

	
 

	
 


	
   

	 

	
   

	
 ) DIRECTORS 


	
   

	
   

	
   

	
 ) 


	
   

	 
	
   

	
 ) 


	
   

	
   

	
   

	
 ) 





 The accompanying notes are an integral part
of the consolidated financial statements. 


3








 NEGEVTECH LTD.


CONSOLIDATED STATEMENTS OF OPERATIONS


(U.S. dollars in thousands) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 Year ended December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
 Note 

	
   

	
 2005 

	
   

	
 2004 

	
   

	
 2003 

	
   


	
   

	
   

	


	
   

	


	
   

	


	
   

	



	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 REVENUES 

	
   

	
   

	
   

	
 15,856 

	
   

	
 3,290 

	
   

	
   

	
   


	
 COST OF REVENUES 

	
   

	
   

	
   

	
 8,918 

	
   

	
 2,245 

	
   

	
 615 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
 GROSS PROFIT (LOSS) 

	
   

	
   

	
   

	
 6,938 

	
   

	
 1,045 

	
   

	
 (615 

	
 ) 


	
 RESEARCH AND DEVELOPMENT COSTS: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Research and development expenses 

	
   

	
 9g 

	
   

	
 9,158 

	
   

	
 7,043 

	
   

	
 6,650 

	
   


	
 L e s s - royalty bearing participation
  from the Government of Israel 

	
   

	
   

	
   

	
 1,524 

	
   

	
 2,000 

	
   

	
 2,100 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
 RESEARCH AND DEVELOPMENT
  EXPENSES - net 

	
   

	
   

	
   

	
 7,634 

	
   

	
 5,043 

	
   

	
 4,550 

	
   


	
 MARKETING, GENERAL AND ADMINISTRATIVE
  EXPENSES, net 

	
   

	
 9h 

	
   

	
 12,932 

	
   

	
 4,703 

	
   

	
 2,922 

	
   


	
 NON-CASH EXPENSES IN RESPECT OF CONVERSION
  OF FOUNDERS’ ORDINARY SHARES INTO ORDINARY PREFERRED SHARES 

	
   

	
   

	
   

	
   

	
   

	
 6,437 

	
   

	
   

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
 OPERATING LOSS 

	
   

	
   

	
   

	
 13,628 

	
   

	
 15,138 

	
   

	
 8,087 

	
   


	
 FINANCIAL EXPENSES (INCOME), net: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 NON-CASH EXPENSES IN RESPECT OF CONVERSION
  OF CONVERTIBLE LOANS FROM SHEREHOLDERS 

	
   

	
   

	
   

	
 1,251 

	
   

	
   

	
   

	
   

	
   


	
 OTHER FINANCIAL EXPENSES (INCOME), net 

	
   

	
   

	
   

	
 1,232 

	
   

	
 188 

	
   

	
 (123 

	
 ) 


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
 LOSS FOR THE PERIOD 

	
   

	
   

	
   

	
 16,111 

	
   

	
 15,326 

	
   

	
 7,964 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   





 The accompanying notes are an integral part
of the consolidated financial statements. 


4










 (Continued) - 1 


 NEGEVTECH LTD.


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY



(U.S. dollars in thousands, except share
amounts) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 Share capital 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Ordinary

 shares 

	
   

	
 Preferred

 shares 

	
   

	
 Amount 

	
   

	
 Additional

 paid-in

 capital 

	
   

	
 Deferred

 stock-based

 compensation 

	
   

	
 Warrants 

	
   

	
 Accumulated 

  deficit  

	
   

	
 Total 

	
   


	
   

	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
 Number of shares 

	
   

	
 U . S .   d o l l a r s   i n   t h o u s a n d s 

	
   


	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 BALANCE AT JANUARY 1, 2003 

	
   

	
   

	
 2,508,392 

	
   

	
   

	
 12,071,278 

	
   

	
   

	
 36 

	
   

	
   

	
 36,588 

	
   

	
   

	
 (31 

	
 ) 

	
   

	
 194 

	
   

	
   

	
 (12,724 

	
 ) 

	
   

	
 24,063 

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 CHANGES DURING 2003: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Warrants issued to service providers 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 25 

	
   

	
   

	
   

	
   

	
   

	
 25 

	
   


	
 Issuance expenses 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (1 

	
 ) 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (1 

	
 ) 


	
 Exercise of warrants 

	
   

	
   

	
 71,829 

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 

	
   

	
 53 

	
   

	
   

	
   

	
   

	
   

	
 (53 

	
 ) 

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 


	
 Exercise of employee stock options 

	
   

	
   

	
 2,500 

	
   

	
   

	
   

	
   

	
   

	
 1 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 1 

	
   


	
 Amortization of deferred stock-based
compensation 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 24 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 24 

	
   


	
 Loss 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (7,964 

	
 ) 

	
   

	
 (7,964 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 BALANCE AT DECEMBER 31, 2003- forward  

	
   

	
   

	
 2,582,721 

	
   

	
   

	
 12,071,278 

	
   

	
   

	
 37 

	
   

	
   

	
 36,640 

	
   

	
   

	
 (7 

	
 ) 

	
   

	
 166 

	
   

	
   

	
 (20,688 

	
 ) 

	
   

	
 16,148 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   








	
 

	
 

	
 


	
   

	
 (a) 

	
 Represents
 an amount less than $ 1. 





5








 (Continued) - 2 


 NEGEVTECH LTD.


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY



(U.S. dollars in thousands, except share) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 Share capital 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Ordinary

 shares 

	
   

	
 Ordinary

 preferred

 shares 

	
   

	
 Preferred 

  shares  

	
   

	
 Amount 

	
   

	
 Additional

 paid-in

 capital 

	
   

	
 Deferred

 stock-based

 compensation 

	
   

	
 Warrants 

	
   

	
 Accumulated 

  deficit  

	
   

	
 Total 

	
   


	
   

	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
 Number of shares 

	
   

	
 U . S .   d o l l a r s   i n   t h o u s a n d s 

	
   


	
   

	
   

	


	
   

	



	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 BALANCE AT JANUARY 1, 2004 -  forward  

	
   

	
   

	
 2,582,721 

	
   

	
   

	
   

	
   

	
   

	
 12,071,278 

	
   

	
   

	
 37 

	
   

	
   

	
 36,640 

	
   

	
   

	
 (7 

	
 ) 

	
   

	
 166 

	
   

	
   

	
 (20,688 

	
 ) 

	
   

	
 16,148 

	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 CHANGES DURING 2004: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Warrants issued to service providers 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 12 

	
   

	
   

	
   

	
   

	
   

	
 12 

	
   


	
 Exercise of warrants 

	
   

	
   

	
 53,206 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 


	
 Exercise of employee stock options 

	
   

	
   

	
 26,000 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 


	
 Conversion of founders ordinary shares into ordinary
preferred shares,
 see note 8a (4) 

	
   

	
   

	
 (2,401,978 

	
 ) 

	
   

	
 2,401,978 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 6,437 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 6,437 

	
   


	
 Amortization of deferred stock-based
compensation 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 7 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 7 

	
   


	
 Loss 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (15,326 

	
 ) 

	
   

	
 (15,326 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 BALANCE AT DECEMBER 31, 2004-  forward  

	
   

	
   

	
 259,949 

	
   

	
   

	
 2,401,978 

	
   

	
   

	
 12,071,278 

	
   

	
   

	
 37 

	
   

	
   

	
 43,077 

	
   

	
   

	
 -,- 

	
   

	
   

	
 178 

	
   

	
   

	
 (36,014 

	
 ) 

	
   

	
 7,278 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   








	
 

	
 

	
 


	
   


	
 (a) 

	
 Represents
 an amount less than $ 1. 





6










 (Concluded) - 3 


 NEGEVTECH LTD.


STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


(U.S. dollars in thousands, except share
amounts) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 Share capital 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Ordinary

  shares 

	
   

	
 Ordinary

  preferred

  shares 

	
   

	
 Preferred

  shares 

	
   

	
 Amount 

	
   

	
 Additional

  paid-in

  Capital 

	
   

	
 Warrants 

	
   

	
 Accumulated

  deficit 

	
   

	
 Total 

	
   


	
   

	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
 Number of shares 

	
   

	
 U.S. dollars in thousands 

	
   


	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 BALANCE AT JANUARY 1, 2005  -
forward  

	
   

	
   

	
 259,949 

	
   

	
   

	
 2,401,978 

	
   

	
   

	
 12,071,278 

	
   

	
   

	
 37 

	
   

	
   

	
 43,077 

	
   

	
   

	
 178 

	
   

	
   

	
 (36,014 

	
 ) 

	
   

	
 7,278 

	
   


	
 CHANGES DURING 2005: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Warrants issued to a service providers 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 5 

	
   

	
   

	
   

	
   

	
   

	
 5 

	
   


	
 Warrants issued in connection with loans from
Plenus 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 1,559 

	
   

	
   

	
   

	
   

	
   

	
 1,559 

	
   


	
 Exercise of employee stock options 

	
   

	
   

	
 169,000 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (a 

	
 ) 

	
   

	
 7 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 7 

	
   


	
 Issuance of preferred AA shares as a result of
equity consolidation
  (c) 

	
   

	
   

	
   

	
   

	
   

	
 (832,974 

	
 ) 

	
   

	
 1,072,792 

	
   

	
   

	
 3 

	
   

	
   

	
 (3 

	
 ) 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Interest expense in respect of conversion of
convertible loans from
  shareholders 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 1,251 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 1,251 

	
   


	
 Issuance of Preferred BB1 and BB2 Shares capital
(b), (c) 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 11,749,363 

	
   

	
   

	
 26 

	
   

	
   

	
 22,115 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 22,141 

	
   


	
 Loss 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
 (16,111 

	
 ) 

	
   

	
 (16,111 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 BALANCE AT DECEMBER 31, 2005 

	
   

	
   

	
 428,949 

	
   

	
   

	
 1,569,004 

	
   

	
   

	
 24,893,433 

	
   

	
   

	
 66 

	
   

	
   

	
 66,447 

	
   

	
   

	
 1,742 

	
   

	
   

	
 (52,125 

	
 ) 

	
   

	
 16,130 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   








	
 

	
 

	
 


	
   

	
 (a) 

	
 Represents an amount less
  than $ 1. 


	
   

	
   

	
   


	
   

	
 (b) 

	
 Net of Issuance expenses
  of $859 thousands. 


	
   

	
   

	
   


	
   

	
 (c) 

	
 See note 8a(5) 





 The accompanying notes are an integral part
of the consolidated financial statements. 


7








 NEGEVTECH LTD.


CONSOLIDATED STATEMENTS OF CASH FLOWS 

(U.S. dollars in thousands) 


	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 Year ended December 31 

	
   


	
   

	
   

	


	
   


	
   

	
   

	
 2005 

	
   

	
 2004 

	
   

	
 2003 

	
   


	
   

	
   

	


	
   

	


	
   

	



	
   


	
   


	
 CASH FLOWS FROM OPERATING ACTIVITIES: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Loss for the period 

	
   

	
   

	
 (16,111 

	
 ) 

	
   

	
 (15,326 

	
 ) 

	
   

	
 (7,964 

	
 ) 


	
 Adjustments required to reconcile loss to net cash
used in operating
  activities: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Depreciation and amortization 

	
   

	
   

	
 1,838 

	
   

	
   

	
 649 

	
   

	
   

	
 439 

	
   


	
 Accrued severance pay - net 

	
   

	
   

	
 (6 

	
 ) 

	
   

	
 (32 

	
 ) 

	
   

	
 34 

	
   


	
 Issuance of warrants to service providers 

	
   

	
   

	
   

	
   

	
   

	
 12 

	
   

	
   

	
 25 

	
   


	
 Amortization of debt insurance cost 

	
   

	
   

	
 435 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Amortization of deferred stock based compensation
in respect of
  options granted to employees 

	
   

	
   

	
   

	
   

	
   

	
 7 

	
   

	
   

	
 24 

	
   


	
 Interest expenses related to convertible
loan 

	
   

	
   

	
 310 

	
   

	
   

	
 50 

	
   

	
   

	
   

	
   


	
 Interest expense in respect of conversion of
convertible loans from
  shareholders 

	
   

	
   

	
 1,251 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Non cash expenses in respect of conversion of
founders’
  ordinary-shares into ordinary preferred shares 

	
   

	
   

	
   

	
   

	
   

	
 6,437 

	
   

	
   

	
   

	
   


	
 Changes in operating asset and liability
items: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Decrease (increase) in trade accounts
receivable 

	
   

	
   

	
 (2,490 

	
 ) 

	
   

	
 311 

	
   

	
   

	
 (1,040 

	
 ) 


	
 Decrease (increase) in other accounts
receivable 

	
   

	
   

	
 (104 

	
 ) 

	
   

	
 (910 

	
 ) 

	
   

	
 407 

	
   


	
 Increase in inventories 

	
   

	
   

	
 (9,707 

	
 ) 

	
   

	
 (4,475 

	
 ) 

	
   

	
 (4,127 

	
 ) 


	
 Increase (decrease) in trade payables 

	
   

	
   

	
 1,876 

	
   

	
   

	
 2,263 

	
   

	
   

	
 (12 

	
 ) 


	
 Increase in other accounts payable and
accruals 

	
   

	
   

	
 1,112 

	
   

	
   

	
 798 

	
   

	
   

	
 25 

	
   


	
 Increase (decrease) in deferred revenues 

	
   

	
   

	
 550 

	
   

	
   

	
 (1,040 

	
 ) 

	
   

	
 1,040 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 Net cash used in operating activities 

	
   

	
   

	
 (21,046 

	
 ) 

	
   

	
 (11,256 

	
 ) 

	
   

	
 (11,149 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 CASH FLOWS FROM INVESTING ACTIVITIES: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Purchase of fixed assets 

	
   

	
   

	
 (1,303 

	
 ) 

	
   

	
 (2,978 

	
 ) 

	
   

	
 (321 

	
 ) 


	
 Long-term deposit 

	
   

	
   

	
 8 

	
   

	
   

	
 (1,094 

	
 ) 

	
   

	
 (24 

	
 ) 


	
 Short-term deposit 

	
   

	
   

	
 32 

	
   

	
   

	
 1,503 

	
   

	
   

	
 (1,535 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 Net cash used in investing activities 

	
   

	
   

	
 (1,263 

	
 ) 

	
   

	
 (2,569 

	
 ) 

	
   

	
 (1,880 

	
 ) 


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 CASH FLOWS FROM FINANCING ACTIVITIES: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Short-term bank credit - net 

	
   

	
   

	
 (243 

	
 ) 

	
   

	
 243 

	
   

	
   

	
   

	
   


	
 Long term bank loan 

	
   

	
   

	
   

	
   

	
   

	
 2,500 


	
   

	
   

	
   

	
   


	
 Long term loan from other 

	
   

	
   

	
 7,700 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
 Repayment of long term bank loan 

	
   

	
   

	
 (834 

	
 ) 

	
   

	
 (486 

	
 ) 

	
   

	
   

	
   


	
 Proceeds from convertible loan received 

	
   

	
   

	
 9,404 

	
   

	
   

	
 5,000 

	
   

	
   

	
   

	
   


	
 Exercise of warrants by a service
providers 

	
   

	
   

	
   

	
   

	
   

	
 * 

	
   

	
   

	
 * 

	
   


	
 Exercise of Employee stock options 

	
   

	
   

	
 7 

	
   

	
   

	
 * 

	
   

	
   

	
 1 

	
   


	
 Issuance of share capital, net of share issuance
expenses 

	
   

	
   

	
 7,377 

	
   

	
   

	
   

	
   

	
   

	
 12,349 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 Net cash provided by financing activities 

	
   

	
   

	
 23,411 

	
   

	
   

	
 7,257 

	
   

	
   

	
 12,350 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 

	
   

	
   

	
 1,102 

	
   

	
   

	
 (6,568 

	
 ) 

	
   

	
 (679 

	
 ) 


	
 BALANCE OF CASH AND CASH EQUIVALENTS AT BEGINNING OF
  THE YEAR 

	
   

	
   

	
 254 

	
   

	
   

	
 6,822 

	
   

	
   

	
 7,501 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
 BALANCE OF CASH AND CASH EQUIVALENTS AT END OF THE
  YEAR 

	
   

	
   

	
 1,356 

	
   

	
   

	
 254 

	
   

	
   

	
 6,822 

	
   


	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   





 Supplementary information on operating and
financing activities not involving cash flows:  


 During 2005,
an inventory in the amount of $3,487 thousands was recategorized as fixed
assets. 


 * Represents an amount less than $ 1. 


 The accompanying notes are an integral part
of the consolidated financial statements. 


8









 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 


	
 

	
 

	
 

	
 


	
 NOTE 1    – 

	
 SIGNIFICANT ACCOUNTING POLICIES  


	
   

	
   

	
   

	
   


	
   

	
 The
  significant accounting policies, applied on a consistent basis, are as
  follows: 


	
   

	
   


	
   

	
 a. 

	
 General: 


	
   

	
   

	
   


	
   

	
   

	
 1) 

	
 Nature of
  operations 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 Negevtech
  Ltd. (the “Company”) - Commenced operations in January 1, 1999. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The Company
  and its wholly owned subsidiaries - Negevtech Inc, Negevtech Pte. Ltd Taiwan
  Branch, Negevtech GMBH and Negevtech Japan Ltd (“the Group”) develop,
  manufacture and market leading edge process diagnostics equipment for the
  semiconductor industry. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The
  accompanying consolidated financial statements have been prepared on a basis
  which assumes that the Company will continue as a going concern, which
  contemplates the realization of assets and the satisfaction of liabilities
  and commitments in the normal course of business. The Company has experienced
  significant net operating losses and negative cash flow since its inception.
  To date, the Company has funded its operations through various preferred
  stock, common stock and debt issuances. The Company’s planned growth will
  require continued substantial capital expenditures. The Company’s ability to
  fund these expenditures is dependent upon its ability to continue to execute
  under its business strategy and upon raising additional financing
  arrangements through public or private equity financing, collaborative or
  other arrangements with corporate sources, or other sources of financing to
  fund operations. The Company can make no assurances that it would be
  successful in raising additional capital, if needed, on favorable terms or at
  all. Failure to raise sufficient funds may require the Company to modify,
  delay or abandon some of its future expenditures. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 At December
  31, 2005, the Company had approximately $1,356 thousands in cash and cash
  equivalents. The Company’s 2006 plan assumes that the Company will have
  positive cash and cash equivalents at December 31, 2006. The amount of cash
  as of December 31, 2006 is dependent upon factors that could differ
  materially from the estimates. Should factors assumed in the 2006 plan differ
  materially, operation will need to be scaled back or discontinued. The
  financial statements do not include any adjustments relating to the
  recoverability of the carrying amounts of recorded assets or the amount of
  liabilities that might result from the outcome of this uncertainty. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 2) 

	
 Use of
  estimates in preparation of financial statements 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The
  preparation of financial statements in conformity with generally accepted
  accounting principles (“GAAP”) in the United States (“U.S. GAAP”), requires
  management to make estimates and assumptions that affect the reported amounts
  of assets and liabilities and disclosure of contingent assets and liabilities
  at the dates of the financial statements and the reported amounts of revenues
  and expenses during the reporting years. The most significant estimates and
  assumptions relate to inventories, revenue recognition and stock options
  valuations. Actual results could differ from those estimates. 





9








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 1    – 

	
 SIGNIFICANT ACCOUNTING POLICIES (continued):
  


	
   

	
   


	
   

	
 b. 

	
 Functional currency  


	
   

	
   

	
   


	
   

	
   

	
 The currency
  of the primary economic environment in which the operations of the Company
  and its subsidiaries are conducted is the U.S. dollar (“dollar; $”), because
  most sales are made and expected to be made in dollars and most of the
  expenses are incurred in dollars or linked thereto. 


	
   

	
   

	
   


	
   

	
   

	
 Transactions
  and balances originally denominated in dollars are presented at their
  original amounts. Balances in non-dollar currencies are translated into
  dollars using historical and current exchange rates for non-monetary and
  monetary balances, respectively. For non-dollar transactions reflected in the
  statements of operations, the exchange rates at transaction dates are used.
  Depreciation deriving from non-monetary items is based on historical exchange
  rates. The resulting translation gains or losses are carried to financial
  income or expenses, as appropriate. 


	
   

	
   

	
   


	
   

	
   

	
 The dollar
  amounts presented in these financial statements should not be construed to
  represent amounts receivable or payable in dollars or convertible into
  dollars, unless otherwise indicated in these financial statements. 


	
   

	
   

	
   


	
   

	
 c. 

	
 Principles of consolidation  


	
   

	
   

	
   


	
   

	
   

	
 Intercompany
  balances and transactions have been eliminated in consolidation. Profits from
  intercompany sales, not yet realized outside the Group, also have been eliminated
  in consolidation. 


	
   

	
   

	
   


	
   

	
 d. 

	
 Cash equivalents  


	
   

	
   

	
   


	
   

	
   

	
 The Company
  considers all highly liquid investments, which include short-term bank
  deposits (up to three months from date of deposit) that are not restricted as
  to withdrawal or use, to be cash equivalents. 


	
   

	
   

	
   


	
   

	
 e. 

	
 Inventories  


	
   

	
   

	
   


	
   

	
   

	
 Inventories
  (raw materials, products in process and finished products) are valued at the
  lower of cost or market; cost is measured using the “moving average” basis.
  Labor and overhead allocations are on the basis of fully loaded manufacturing
  costs. 


	
   

	
   

	
   


	
   

	
 f. 

	
 Fixed assets  


	
   

	
   

	
   


	
   

	
   

	
 These assets
  are stated at cost and are depreciated by the straight-line method over their
  estimated useful life. 
Annual rates of depreciation are as follows: 








	
 

	
 


	
   

	
 % 


	
   

	




	
 Computers
  and electronic equipment 

	
 15-66 


	
 Office
  furniture and equipment 

	
 6-15 








	
 

	
 

	
 


	
   

	
   

	
 Leasehold
  improvements are amortized by the straight-line method over the shorter of
  term of the lease or the estimated useful life of the improvements. 





10








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 1    – 

	
 SIGNIFICANT ACCOUNTING POLICIES (continued):
  


	
   

	
   


	
   

	
 g. 

	
 Research and development  


	
   

	
   

	
   


	
   

	
   

	
 Costs
  incurred in the research and development of the Company’s products are
  expensed as incurred. Participation from Chief Scientist is recognized as a
  reduction of expense as the related costs are incurred. 


	
   

	
   

	
   


	
   

	
 h. 

	
 Revenue recognition  


	
   

	
   

	
   


	
   

	
   

	
 The company
  recognizes revenue from product sales in accordance with Staff Accounting
  Bulletin (SAB) No. 104 – “Revenue Recognition”. Product revenue is recognized
  when there is persuasive evidence of an arrangement, the fee is fixed or
  determinable, delivery of the product to the customer has occurred and the
  company has determined that collection of the fee is reasonably assured. If
  the product requires specific customer acceptance, revenue is deferred until
  customer acceptance occurs or the acceptance provisions lapse. 


	
   

	
   

	
   


	
   

	
   

	
 In some
  cases, the Company grants its customers an evaluation period, usually several
  months, to evaluate the product prior to purchase. The Company does not
  recognize revenue from products shipped to customers for evaluation until
  such products are actually purchased and a final acceptance certificate is
  provided by the customer. 


	
   

	
   

	
   


	
   

	
   

	
 Until Revenue
  is recognized, these products are recorded as inventory at the lower of cost
  or market. 


	
   

	
   

	
   


	
   

	
 i. 

	
 Stock-based compensation  


	
   

	
   

	
   


	
   

	
   

	
 Employee
  stock awards under the Company’s compensation plans are accounted for in
  accordance with Accounting Principles Board Opinion No. 25, “Accounting for
  Stock Issued to Employees” (“APB 25”), and related interpretations. The
  Company provides the disclosure requirements of Statement of Financial
  Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“FAS
  123”), and related interpretations. Under APB 25, compensation expense is
  computed under the intrinsic value method of accounting to the extent that
  the fair value of the underlying shares on the date of grant exceeds the
  exercise price of the stock option. Compensation so computed is deferred and
  then recognized over the vesting period of the stock option. 


	
   

	
   

	
   


	
   

	
   

	
 Had deferred
  compensation been determined under the alternative fair value accounting
  method provided for under SFAS No. 123, “Accounting for Stock-Based
  Compensation”, using the Black-Scholes pricing model with the following
  weighted average assumptions: (1) average expected life of the options is
  four years; (2) dividend yield of 0%; (3) expected volatility of 0% for 2005,
  2004 and 2003; and (4) risk-free interest rate of 4%, 2% and 5% for 2005,
  2004 and 2003, respectively. The effect on the company’s net loss would have
  been immaterial for all reported periods. 





11








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 1    – 

	
 SIGNIFICANT ACCOUNTING POLICIES (continued):
  


	
   

	
   

	
   


	
   

	
 i. 

	
 Stock-based compensation (continued) 


	
   

	
   

	
   


	
   

	
   

	
 Stock based
  awards to non-employees are accounted for under the provisions of FAS No.
  123. Under FAS 123, these equity transactions are accounted for based on the
  fair value of the consideration received or the fair value of the equity
  instruments issued, whichever is more reliably measurable. The value of the
  equity instruments is calculated using the Black-Scholes option-pricing
  model. 


	
   

	
   

	
   


	
   

	
   

	
 FAS 123
  (Revised 2004) Share-based Payment 


	
   

	
   

	
   


	
   

	
   

	
 In December
  2004, the Financial Accounting Standards Board (“FASB”) issued the revised
  Statement of Financial Accounting Standards (“FAS”) No. 123, Share-Based
  Payment (FAS 123R), which addresses the accounting for share-based payment
  transactions in which the company obtains employee services in exchange for
  (a) equity instruments of the company or (b) liabilities that are based on
  the fair value of the company’s equity instruments or that may be settled by the
  issuance of such equity instruments. FAS 123R eliminates the ability to
  account for employee share-based payment transactions using APB Opinion No.
  25 – “Accounting for Stock Issued to Employees”, and requires instead that
  such transactions be accounted for using the grant-date fair value based
  method. This Statement will be effective as of the annual reporting period
  that begins after June 15, 2005 (January 1, 2006). Early adoption of FAS 123R
  is encouraged. This Statement applies to all awards granted or modified after
  the Statement’s effective date. In addition, compensation cost for the
  unvested portion of previously granted awards that remain outstanding on the
  Statement’s effective date shall be recognized on or after the effective
  date, as the related services are rendered, based on the awards’ grant-date
  fair value as previously calculated for the pro-forma disclosure under FAS
  123. 


	
   

	
   

	
   


	
   

	
   

	
 The company
  expects that upon the adoption of FAS 123R, the company will apply the
  modified prospective application transition method, as permitted by the
  Statement. Under such transition method, upon the adoption of FAS 123R, the
  company’s financial statements for periods prior to the effective date of the
  Statement will not be restated. As permitted by FAS 123, the company
  currently accounts for share-based payments to employees using the minimum
  value method and as such the company does not expect that the effect of this
  statements in future periods in respect of options outstanding at December
  31, 2005 will be material. However, the total expense recorded in future
  periods will depend on several variables, including the number of share-based
  awards that vest and the fair value of those vested awards. 





12










 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 1    – 

	
 SIGNIFICANT  ACCOUNTING   POLICIES
 (continued):  


	
   

	
   

	
   


	
   

	
 j. 

	
 Impairment of assets: 


	
   

	
   

	
   


	
   

	
   

	
 The company tests long-lived assets, for impairment, in the event an
 indication of impairment exists. If the sum of expected future cash flows
 (undiscounted and without interest charges) of the long-lived assets is less
 than the carrying amount of such assets, an impairment loss would be
 recognized, and the assets would be written down to their estimated fair
 values, calculated based on expected future discounted cash flows. 


	
   

	
   

	
   


	
   

	
 k. 

	
 Reclassifications 


	
   

	
   

	
   


	
   

	
   

	
 Certain reclassifications were made to prior periods presentation to
 conform to the current year presentation. 


	
   

	
   

	
   


	
   

	
 l. 

	
 Recently issued accounting pronouncement in the United States 


	
   

	
   

	
   


	
   

	
   

	
 FAS 151
 Inventory Costs - an amendment of ARB 43, Chapter 4 


	
 

	
   

	
   


	
   

	
   

	
 In November
 2004, the FASB issued FAS No. 151, “Inventory Costs - an Amendment of ARB 43,
 Chapter 4” (“FAS 151”). This Statement amends the guidance in ARB No. 43,
 Chapter 4, “Inventory Pricing”, to clarify the accounting for abnormal
 amounts of idle facility expense, freight, handling costs, and wasted
 material. This Statement requires that those items be recognized as
 current-period charges. In addition, this Statement requires that allocation
 of fixed production overheads to the costs of conversion be based on the
 normal capacity of the production facilities. This Statement will be
 effective for inventory costs incurred during fiscal years beginning after
 June 15, 2005 (January 1, 2006 for the company). Earlier application of FAS
 151 is permitted. The provisions of this Statement shall be applied
 prospectively. The company does not expect this Statement to have a material
 effect on the company’s financial statements or its results of operations. 


	
   

	
   


	
 NOTE  2    – 

	
 FIXED  ASSETS 


	
   

	
   


	
   

	
 Composition
 of assets, grouped by major classifications, is as follows: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
 December 31 

	
   


	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
 U.S. dollars

 in thousands 

	
   


	
   

	
   

	
   

	



	
   


	
   

	
   

	
   

	
   

	
   


	
   

	
 Cost: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 Computers and electronic equipment 

	
   

	
   

	
 8,811 

	
   

	
   

	
 4,523 

	
   


	
   

	
 Office furniture and equipment 

	
   

	
   

	
 436 

	
   

	
   

	
 317 

	
   


	
   

	
 Leasehold improvements 

	
   

	
   

	
 814 

	
   

	
   

	
 431 

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
 10,061 

	
   

	
   

	
 5,271 

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
 Accumulated
 depreciation and amortization: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 Computers and electronic equipment 

	
   

	
   

	
 2,804 

	
   

	
   

	
 1,102 

	
   


	
   

	
 Office furniture and equipment 

	
   

	
   

	
 124 

	
   

	
   

	
 88 

	
   


	
   

	
 Leasehold improvements 

	
   

	
   

	
 397 

	
   

	
   

	
 297 

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
 3,325 

	
   

	
   

	
 1,487 

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   





13








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 3    – 

	
 ACCRUED  SEVERANCE   PAY  


	
   

	
   

	
   


	
   

	
 The major
 part of the Company’s severance pay liability for most of its Israeli
 employees is covered by insurance policies. The amounts funded as above are
 not reflected in the balance sheets, since they are not under the control and
 management of the Company. Pursuant to Israeli law and employment agreements,
 this liability is computed for each employee at the latest salary rate
 multiplied by the number of years of service. The Company is committed to
 supplement the difference between the amount of liability computed as above
 and the amounts funded. The balance sheet accrual for severance pay reflects
 that part of the liability not covered as above. 


	
   

	
   

	
   


	
 NOTE 4    –  

	
 LONG TERM LOANS 


	
   

	
   

	
   


	
   

	
 a. 

	
 During May
 2004, the Company purchased electronic equipment at the amount of $2.5
 million. The entire purchase was financed through a long-term loan from a
 bank for a period of three years. The loan bears variable annual interest
 rate of Libor + 2.5% (7% at December 31, 2005) and is to be repaid on a
 monthly basis. The equipment and a deposit, currently (at the amount $1,000
 thousand) were pledged in favor of the bank as collateral to the loan. 


	
   

	
   

	
   


	
   

	
   

	
 The
 loan is also guaranteed by a negative pledge. 


	
   

	
   

	
   


	
   

	
 b. 

	
 On January 14,
 2005, the Company signed a loan agreement with Plenus Technologies Ltd.
 (“Plenus”) for a period of 9 months, including 3 months extension from the
 original term (the “Initial loan”). According to this agreement Plenus lent
 the Company $ 4.5 million. The loan bore interest at an annual rate of Libor
 + 4% from the disbursement date of the principal amount until the date of
 actual repayment thereof. The loan was repaid during October 2005. 


	
   

	
   

	
   


	
   

	
   

	
 On October
 13, 2005, The Company signed a new loan agreement with Plenus for a 3 years
 period (the “new loan”). According to this agreement, the Company can draw up
 to $10 million during the 3 year loan term. The loan will bear interest at an
 annual rate of Libor + 4% from the disbursement date of the principal amount
 until the date of actual repayment thereof. As of December, 31, 2005 the
 Company draw $7.7 million. On January 2006 the Company draw an additional
 amount of $2.3 million. 


	
   

	
   

	
   


	
   

	
   

	
 As
 consideration for the grant of the initial loan, the Company granted Plenus
 warrant exercisable during the term of the warrant, at Plenus election into
 series BB1 Preferred Shares at a price per share (“PPS”) of $2.3194 as issued
 at the round of financing. The warrant is exercisable at any time for a
 period of 10 years or through the consummation of a realization event, as
 defined. The aggregate exercise price under the Warrant (including warrant
 received in connection with the extension of the initial loan) is $810
 thousands. As consideration for the grant of the new loan, the Company
 granted Plenus a warrant exercisable during the term of the warrant, at
 Plenus election into series BB1 Preferred shares at a PPS of $ 2.3194. The
 warrant is exercisable at any time for a period of 10 years or through the
 consummation of a realization event, as defined. The aggregate exercise price
 under the new warrant is $2,800 thousands. 


	
   

	
   

	
   


	
   

	
   

	
 The Company recorded the estimated fair
 value of the warrants on the date of the grant, as determined using the
 Black-Scholes option pricing model, as debt issuance costs. Such costs are
 amortized over the loan term as additional interest expenses. The estimated
 fair value of the warrants granted in connection with the initial and the new
 loan is $1,559 thousands of which $434 thousands was recorded as additional
 interest expense in the year ended December 31, 2005. 


	
   

	
   

	
   


	
   

	
   

	
 The loans
 are also guaranteed by a first priority fixed charge on all of the Company
 rights in and to its intellectual property and by a floating charge on all of
 its present and future tangible and intangible assets, pari passu with the
 floating charge and fixed charge in favor of Bank leumi 





14








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 


	
 NOTE 5    – 

	
 CONVERTIBLE LOAN FROM SHAREHEOLDERS 


	
   

	
   

	
   


	
   

	
 On September
 6, 2004, the Company signed an agreement for $ 5 million convertible
 loan received from some of the Company’s existing shareholders. According to
 the agreement, the convertible loan bears annual interest equal to Libor plus
 2.3%. During February 2005, April 2005 and July 2005, the Company received $
 2 million $ 2.6 million and $ 4.8 million, respectively, from its
 shareholders, as additional convertible loans provided at the same terms. 


	
   

	
   

	
   


	
   

	
 All
 of the loans converted into preferred shares in the equity financing (the
 financing), see note 8a(5) bellow. 


	
   

	
   

	
   


	
 NOTE 6    – 

	
 COMMITMENTS AND CONTINGENT LIABILITIES: 


	
   

	
   


	
   

	
 a.  

	
 Royalty commitments 


	
   

	
   

	
   


	
   

	
   

	
 The Company
 is committed to pay royalties to the Government of Israel on proceeds from
 sales of its products developed under a project funded by the Israeli
 Government. Under the terms of Company’s funding from the Israeli Government
 pursuant to applicable laws, royalties of 3% are payable on sales of products
 developed from a project so funded, up to 100% of the amount of the grant
 received by the Company (dollar linked) - with the addition of an annual
 interest rate based on Libor. At December 31, 2005, the maximum amount of the
 contingent liability in respect of royalties due to the Government amounts to
 approximately $8.9 million. 


	
   

	
   

	
   


	
   

	
   

	
 Royalty
 expenses, which totaled approximately $475 thousand and $99 thousand in 2005
 and 2004, respectively, are presented under cost of revenues. 


	
   

	
   

	
   


	
   

	
   

	
 At the time
 the grants were received, successful development of the related projects was
 not assured. In the case of failure of a project that was partly financed by
 royalty-bearing Government grants, the Company is not obligated to pay any
 such royalties to the Israeli Government. 


	
   

	
   

	
   


	
   

	
 b.  

	
 Lease commitments 


	
   

	
   

	
   


	
   

	
   

	
 The Group
 has two operating lease agreements for the premises it uses. The lease
 agreements for the premises will expire in the years 2006 and 2008.

The
 Company has cars lease agreements. The lease agreements for the cars will
 expire in the years 2006 - 2007. 


	
   

	
   

	
   


	
   

	
   

	
 Future
 minimum lease payments under these leases at December 31, 2005 are as
 follows: 








	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 In 

 thousands 

	
   


	
   

	
   

	



	
   


	
 Year ending
 December 31: 

	
   

	
   

	
   

	
   


	
 2006 

	
   

	
   

	
 901 

	
   


	
 2007 

	
   

	
   

	
 856 

	
   


	
 2008 

	
   

	
   

	
 513 

	
   


	
   

	
   

	


	


	
   


	
   

	
   

	
   

	
 2,270 

	
   


	
   

	
   

	


	


	
   








	
 

	
 

	
 


	
   

	
   

	
 The Israeli
 lease fees for the premises are payable in Israeli currency linked to the
 Israeli consumer price index (hereafter - CPI) and the subsidiary lease fees
 are payable in dollars. The lease fees for the cars are payable in Israeli
 currency linked to the exchange rate of the dollar. In consideration of one
 of the Company’s operating lease agreements, the Company gave its lessor a
 bank guarantee in the amount of $ 129 thousands. 





15








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 

	
 

	
 


	
 NOTE 6    – 

	
 COMMITMENTS AND CONTINGENT LIABILITIES (continued) 


	
   

	
   

	
   

	
   


	
   

	
 c. 

	
 Contingent liabilities: 


	
   

	
   

	
   

	
   


	
   

	
   

	
 1) 

	
 In July and August 2004,
 the Company received letters from KLA - Tencor Corporation (“KLA”) asserting
 that the Company’s 302-inspection system makes use of three KLA patents U.S.
 Patent No. 4,805,123, U.S. Patent No. 6,288,780 and U.S. Patent No. 6,686,995
 and requesting technical information regarding the 302 system. In response to
 these letters, the Company has identified certain limitations of the KLA
 patents that are absent from the 302 system. The Company has also requested
 further clarification of KLA’s claims. The ‘123’ patent has been previously
 litigated by KLA, and has been determined by the U.S. District Court for the
 Northern District of California to be invalid. The Company disputes KLA’s
 claims, and is attempting to resolve these issues without resorting to
 litigation. No provision was recorded in the financial statements in respect
 of such claim. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 2) 

	
 On August
 27, 2004, Applied Materials, Inc. filed suit in the U.S. District Court for
 the Northern District of California alleging that the Company’s
 302-inspection system infringes an Applied Materials’ patent (U.S. Patent No.
 5,982,921), and seeking an injunction and unspecified damages. On October 12,
 2004, the Company filed its amended answer to Applied Materials’ complaint
 and also filed counterclaims for declaratory judgment of no infringement and
 invalidity. On June 3, 2005 Applied Materials, Inc. and Applied Materials
 Israel filed an amended compliant aginst the Company. On June 23, 2005 the
 Company filed an answer to the amended compliant and again filed
 counterclaims for declaratory judgment of non-infringement and invalidity. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 On July 14,
 2005, the Court issued an order under the legal doctrine of assignor
 estoppels that prevents the Company from challenging the validity of the ‘921 patent in this lawsuit. That
order does not
 prevent the Company from challenging the validity of the ‘921 patent in the United States Patent and
Trademark
 Office, however. On June 3, 2005, the Company filed a request for the
 reexamination of the‘921
 patent with the USPTO. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 On September 2005, the Uspto granted the Company request to reexamine
 the ‘921
 patent. In October 2005, the court stayed the litigation on the ‘921 patent pending the USPTO
reexamination. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 On October
 24, 2005 Applied Materials filed a second amended complaint asserting two
 additional patents against Negevtech U.S. Patent Nos. 6,256,093 and
 6,924,891. On November 10, 2005, the Company filed an answer to the second
 amended complaint and filed counterclaims for declaratory judgment of
 non-infringement of each of Applied Materials’ patents, and of invalidity
for ‘093 and 891’ patents. During December 2005 and upon hearing the Company arguments Applied
 Materials withdrew the ‘093 patent and cancelled
 the claim. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The Company disputes Applied Materials’ claims and intends
to defend the lawsuit vigorously. No
 provision was recorded in the financial statements in respect of such claims. 





16










 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 7   – 

	
 TAXES  ON   INCOME:  








	
 

	
 

	
 

	
 


	
   

	
 a. 

	
 Corporate taxation in Israel 


	
   

	
   

	
   

	
   


	
   

	
   

	
 1) 

	
 Measurement of results for tax purposes
 under the Income Tax (Inflationary Adjustments) Law, 1985 (hereafter - the
 inflationary adjustments law) 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 Under the inflationary adjustments law,
 results for tax purposes are measured in real terms, having
 regard to the changes in the CPI. The company is taxed under this law. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 2) 

	
 Tax rates: 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The income of the company and its Israeli
 subsidiaries (other than income from “approved enterprises”, see c. below) is
 taxed at the regular rate. Through December 31, 2003, the corporate tax was
 36%. In July 2004, Amendment No. 140 to the Income Tax Ordinance was enacted. One of the
 provisions of this amendment is that the corporate tax rate is to be
 gradually reduced from 36% to 30%. In August 2005, a further amendment (No. 147) was
 published, which makes a further revision to the corporate tax rates
 prescribed by Amendment No. 140. As a result of the aforementioned
 amendments, the corporate tax rates are as follows: 2005 – 34%, 2006 – 31%,
 2007 – 29%, 2008 – 27%, 2009 – 26% and for 2010 and thereafter – 25%. 


	
   

	
   

	
   

	
   


	
   

	
 b. 

	
 Subsidiaries
 outside Israel 


	
   

	
   

	
   

	
   


	
   

	
   

	
 Subsidiaries that are incorporated outside
 of Israel are assessed for tax under the tax laws in their countries of
 residence. 


	
   

	
   

	
   

	
   


	
   

	
 c. 

	
 Tax benefits under the Law for the Encouragement of Capital
 Investments, 1959 


	
   

	
   

	
 (hereafter –
 the law) 


	
   

	
   

	
   

	
   


	
   

	
   

	
 All of the
 Company’s production facilities have been granted “approved enterprise”
 status under the above law. Income derived from the approved enterprise - which
 did not commence operations - is tax exempt during two years, commencing the
 first year it generates taxable income, and is subject to a reduced tax rate
 of 25% during the following five years. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 The Company
 has not yet generated taxable income. The tax benefit period will not extend
 beyond year 2015. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 In the event
 of distribution of cash dividend from income which was tax exempt as above,
 the Company would have to pay the 25% tax in respect of the amount
 distributed. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 The Company is
 entitled to claim accelerated depreciation in respect of equipment used by
 approved enterprises during the first five years of the operation of these
 assets. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 The
 entitlement to the above benefits is conditional upon the Company’s
 fulfilling the conditions stipulated by the above law, regulations published
 thereunder and the certificate of approval for the specific investments in
 approved enterprises. In the event of failure to comply with these
 conditions, the benefits may be cancelled and the Company may be required to
 refund the amount of the benefits, in whole or in part, with the addition of
 linkage differences to the Israeli CPI and interest. 





17








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 7   – 

	
 TAXES  ON   INCOME  (continued): 






	
 

	
 

	
 


	
 

	
 b. 

	
 Tax assessments 


	
   

	
   

	
   


	
   

	
   

	
 The company and its subsidiary have not been assessed for tax purpose
 since incorporation. 


	
   

	
   

	
   


	
   

	
 c. 

	
 Carryforward losses 


	
   

	
   

	
   


	
   

	
   

	
 As of
 December 31, 2005, the Company had a net carryforward tax loss of approximately
 $43.9 million. Under Israeli tax laws, the carryforward tax losses of the
 Company are linked to the Israeli CPI and can be utilized indefinitely. 


	
   

	
   

	
   


	
   

	
   

	
 As of
 December 31, 2005, Negevtech Inc. had a net carryforward tax loss of
 approximately $2 million. 








	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’
EQUITY: 








	
 

	
 

	
 

	
 


	
   

	
 a. 

	
 Share capital: 


	
   

	
   

	
   


	
   

	
   

	
 1) 

	
 The share
 capital of the Company is composed of Ordinary Shares, Ordinary Preferred
 Shares and preferred shares NIS 0.01 par value as follows: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
 Authorized 

	
   

	
 Issued and paid 

	
   


	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
 December 31 

	
   

	
 December 31 

	
   


	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	
   

	


	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
 Number of shares 

	
   


	
   

	
   

	
   

	


	
   


	
   

	
 Ordinary
 Shares 

	
   

	
   

	
 42,000,996 

	
   

	
   

	
 3,925,978 

	
   

	
   

	
 428,949 

	
   

	
   

	
 259,949 

	
   


	
   

	
 Ordinary
 Preferred Shares 

	
   

	
   

	
 1,569,004 

	
   

	
   

	
 2,401,978 

	
   

	
   

	
 1,569,004 

	
   

	
   

	
 2,401,978 

	
   


	
   

	
 Preferred
 Shares Class A* 

	
   

	
   

	
   

	
   

	
   

	
 1,477,676 

	
   

	
   

	
   

	
   

	
   

	
 1,477,676 

	
   


	
   

	
 Preferred
 Shares Class B* 

	
   

	
   

	
   

	
   

	
   

	
 1,111,335 

	
   

	
   

	
   

	
   

	
   

	
 1,111,335 

	
   


	
   

	
 Preferred
 Shares Class C* 

	
   

	
   

	
   

	
   

	
   

	
 2,020,030 

	
   

	
   

	
   

	
   

	
   

	
 2,020,030 

	
   


	
   

	
 Preferred
 Shares Class D* 

	
   

	
   

	
   

	
   

	
   

	
 10,863,445 

	
   

	
   

	
   

	
   

	
   

	
 7,462,237 

	
   


	
   

	
 Preferred
 Shares Class AA 

	
   

	
   

	
 15,000,000 

	
   

	
   

	
   

	
   

	
   

	
 13,144,070 

	
   

	
   

	
   

	
   


	
   

	
 Preferred
 Shares Class BB-1 

	
   

	
   

	
 13,000,000 

	
   

	
   

	
   

	
   

	
   

	
 8,152,257 

	
   

	
   

	
   

	
   


	
   

	
 Preferred
 Shares Class BB-2 

	
   

	
   

	
 4,000,000 

	
   

	
   

	
   

	
   

	
   

	
 3,597,106 

	
   

	
   

	
   

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
 75,570,000 

	
   

	
   

	
 21,800,442 

	
   

	
   

	
 26,891,386 

	
   

	
   

	
 14,733,205 

	
   


	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   

	


	


	
   








	
 

	
 

	
 


	
   

	
   

	
 *During 2005, all classes of preferred shares were recapitalized and
 converted into one class AA, see
  note 8a(3). 





18








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’ EQUITY (continued): 








	
 

	
 

	
 

	
 


	
 

	
 

	
 2) 

	
 Rights
attached to Preferred Shares 


	
   


	
   

	
   

	
   

	
 The
 Preferred Shares confer on their holders all the rights conferred by Ordinary
 Shares; each holder of Preferred Share shall be entitled to one (1) vote per
 Ordinary Share into which such Preferred Share is convertible at the time of
 voting. In addition, each Preferred Share is convertible at the option of the
 holder, at any time, into such number of Ordinary Shares of the Company as is
 determined by dividing the applicable original purchase price for such
 Preferred Share by the conversion price at the time in effect for each such
 Preferred Share. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 Each Preferred Share shall automatically be
 converted into Ordinary Shares at the conversion price at the time in effect
 for such Preferred Share upon the earlier of: (A) a Qualified IPO, or (B) the
 written consent of the Majority Preferred Shareholders. The Series AA
 Preferred Shares shall also automatically be converted into Ordinary Shares
 as aforesaid upon the consent of the holders of at least sixty six percent
 (66%) of the issued and then outstanding Series AA Preferred Shares. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 In the event
 of any liquidation, dissolution, winding up, certain reorganization of the
 Company, or any distribution of dividends (collectively “Liquidation Event”),
 then the amount of declared dividends or any assets of the Company available
 for distribution in connection with, or the consideration received in, such
 Liquidation Event shall be distributed pursuant to the following order of preference:
 (i) holders of the Series BB Preferred Shares and thereafter (ii) holders of
 the Series AA Preferred Shares and the Ordinary-Preferred Shares and
 thereafter (iii) holders of Preferred Shares, Ordinary Preferred Shares and
 ordinary Preferred Shares are entitled to participate on a pro rata as
 converted basis in the distribution of remaining assets. Such Preferred
 Shares and Ordinary Preferred Shares liquidation preference will be composed
 of the original per share purchase price, as adjusted, plus an 8% compounded
 annual return and all declared but unpaid dividends. Notwithstanding the
 foregoing, if the amount payable on account of any Preferred BB-1 Share
 exceeds a certain amount as set forth in the Company’s Articles, then all
 holders of Shares of the Company of all classes shall participate pro-rata on
 an as converted basis in any distribution. 






19










 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’ EQUITY (continued): 








	
 

	
 

	
 

	
 


	
   

	
   

	
 3) 

	
 During the
  years 2000, 2001 and 2002, the Company issued in several rounds of financing
  Preferred Shares of the Company for a total consideration of approximately
  $37 million. As mentioned below, as part of the round of financing, which
  took place during 2005, all classes of preferred shares were recapitalized
  and converted into one class, Preferred AA Shares and all outstanding
  warrants granted to Investors under the 2002 financing round were
  recapitalization so that following the 2005 financing round, such warrants
  represent all rights to purchase Series AA Preferred Shares of the Company at
  a price per Share of $4.02. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The total
  number of Series AA Preferred Shares that may be purchased pursuant to such
  warrants is 1,659,779 and they may be exercised whole or in part any time
  prior to the expiration date stipulated in the warrants certificates. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 4) 

	
 On December
  26, 2004, the Company signed an agreement with its founders (the “Founders”).
  According to this agreement a new class of shares, the “Ordinary-Preferred
  Shares”, was formed as detailed herein and all Ordinary Shares of the Company
  held by each of the Founders as of that date were converted into an equal
  number of Ordinary-Preferred Shares of the Company. In addition, the Founders
  were granted certain rights to sell a portion of the shares held by them. In
  connection with such conversion of Ordinary Shares into Ordinary-Preferred
  Shares, the Company recorded non-cash expenses of $6,437 thousands,
  representing the estimated difference in the fair value of Ordinary Shares
  vs. the Ordinary - Preferred Shares. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 The
  Ordinary-Preferred Shares confer on their holders all the rights conferred by
  Ordinary Shares; in addition, each Ordinary-Preferred Share is convertible,
  at any time, into Ordinary Shares of the Company pursuant to the calculation
  provided for in the Articles. The Ordinary-Preferred Shares will
  automatically convert into Ordinary Shares (i) in the event of an automatic
  conversion of the Series AA Preferred Shares, or (ii) upon the consent of the
  holders of at least 66% of the issued and outstanding Ordinary-Preferred
  Shares. 


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 For each payout
  of a liquidation preference, holders of Ordinary-Preferred Shares are
  entitled to participate together with the holders of Series AA Preferred
  Shares (as provided for in the Articles). 





20








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 


	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’ EQUITY (continued): 








	
 

	
 

	
 

	
 


	
   

	
   

	
 5) 

	
 On September
  13, 2005, the Company closed its Series BB Preferred Share financing, under
  which $23 million were invested in the share capital of the Company
  (hereafter - the Financing). $14.4 million of which were invested by way of
  conversion of convertible loans (plus interest) previously extended to the
  Company by its existing shares holders, see note 5. Out of the convertible
  notes, an amount of $7 million was converted into Preferred BB-2 Shares at a
  discount of 15% on the price per share of the Financing. The rest of the
  convertible loans were converted into Preferred BB-1 Shares. The Company
  recorded $1.251 million non-cash finance expense in respect of this discount.
  


	
   

	
   

	
   

	
   


	
   

	
   

	
   

	
 In the
  framework of the Financing, the share capital of the company was
  recapitalized, whereby all classes of Preferred Shares were converted into
  one class, Preferred AA Shares. 


	
   

	
   

	
   

	
   


	
   

	
 b. 

	
 Warrants to service providers  


	
   

	
   

	
   

	
   


	
   

	
   

	
 In February
  2000, the Company issued to service provider 319,240 warrants in
  consideration of services received. Each warrant can be exercised to purchase
  one Ordinary Share of NIS 0.01 par value of the Company based on the
  achievement of specified targets, at par value. The fair value of these
  warrants amounted to approximately $223,000, estimated on the fair estimated
  using the Black-Scholes option-pricing model - based on the following
  assumptions: dividend yield of 0%; expected volatility of 50%; risk free
  interest rate of 7% and expected life of two years. In respect of these
  warrants, the Company recorded expenses of $15 thousand in 2003. The majority
  of the expenses are presented in the statements of operations under Research
  and development expenses. Through December 31, 2005, 159,620 warrants have
  been exercised. 


	
   

	
   

	
   

	
   


	
   

	
   

	
 In July
  2005, the Company issued to service provider 20,000 warrants in consideration
  of services. Each warrant can be exercised to purchase one ordinary share of
  NIS 0.01 par value of the Company. The fair value of these warrants amounted
  to approximately $5,452, estimated on the fair estimated using the Black
  -Schles option-pricing model - based on the following assumptions dividend
  yield of 0%; expected volatility of 50%; risk free interest rate of 4% and expected
  life of four years. In respect of these warrants, the Company recorded
  expenses of $1.3 thousand. 





21








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’ EQUITY (continued): 








	
 

	
 

	
 


	
   

	
 c. 

	
 Stock option plan  


	
   

	
   

	
   


	
   

	
   

	
 In March
  2001, the Company’s board of directors and shareholders approved a stock
  option plan (hereafter - the Plan). The maximum number of shares subject to
  the Plan as of December 31, 2005 was 4,907,003. Options under the Plan may be
  granted to employees, directors and service providers. Each option can be
  exercised to purchase one ordinary share of NIS 0.01 par value of the
  Company. Immediately upon issuance, the Ordinary Shares purchased in exercise
  of the options will have the same rights as other Company Ordinary Shares.



	
   

	
   

	
   


	
   

	
   

	
 From the effective date of grant, options generally vest 50% after two years,
  75% after three years, and 100% after four years. Each option is exercisable
  from its vesting until no later than 10 years from the date of grant. 


	
   

	
   

	
   


	
   

	
   

	
 The plan is subject to the terms stipulated by Section 102 of the Israeli Income
  Tax Ordinance and the rules promulgated thereunder. Inter alia, these terms
  provide that the Company will be allowed to claim, as an expense for tax
  purposes, the amounts credited to the employees as a benefit in respect of
  shares or options granted under the Plan, as follows: Through December 31,
  2002, the amount that the Company will be allowed to claim as an expense for
  tax purposes will be the amount of the benefit chargeable to tax in the hands
  of the employee. As from January 1, 2003, according with a tax reform in
  Israel, the benefit that is chargeable to capital gains tax in the hands of
  the employee shall not be allowable. All being subject to the restrictions
  specified in Section 102 of the Income Tax Ordinance. The aforementioned
  expense will be recognized in the tax year that the benefit is credited to
  the employee. 


	
   

	
   

	
   


	
   

	
   

	
 In the years
  ended December 31, 2005, 2004 and 2003, the Company recorded an expense of $0
  thousand, $7 thousand and $24 thousand, respectively in connection with
  options granted to employees. The majority of the expense is presented in the
  statements of operations under research and development expenses. 


	
   

	
   

	
   


	
   

	
   

	
 In the years
  ended December 31, 2005, 2004 and 2003, the company recorded an expense of
  $0, $12 thousand and $10 thousand, respectively in connection with warrants
  granted to service providers. The majority of the expense is presented in the
  statements of operations under research and development expenses. 





22








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 8   – 

	
 SHAREHOLDERS’ EQUITY (continued): 








	
 

	
 

	
 


	
   

	
   

	
 A summary of
  the status of the Company’s stock option plans as of December 31, 2005, as
  well as changes during the year then ended, is as follows: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 Year ended December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
 Number 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
 Outstanding
  - beginning of year 

	
 2,665,361 

	
   

	
 1,432,500 

	
   


	
   

	
   

	
   

	
 Granted 

	
 2,289,865 

	
   

	
 1,414,861 

	
   


	
   

	
   

	
   

	
 Exercised 

	
 169,000 

	
   

	
 26,000 

	
   


	
   

	
   

	
   

	
 Forfeited 

	
 80,500 

	
   

	
 156,000 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
 Outstanding
  - end of year 

	
 4,705,726 

	
   

	
 2,665,361 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 December 31, 2005 

	
   


	
   

	
   

	


	


	


	
   

	
   


	
   

	
   

	
   

	
   

	
 Options

  outstanding 

	
   

	
 Options

  exercisable 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	
   


	
   

	
   

	
 Exercise prices 

	
   

	
 Number of options 

	
   


	
   

	
   

	


	
   

	


	
   

	
   


	
   

	
   

	
 $ 

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	


	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 0.01 

	
   

	
   

	
 285,500 

	
   

	
 285,500 

	
   

	
   


	
   

	
   

	
 0.29 

	
   

	
   

	
 174,500 

	
   

	
 174,500 

	
   

	
   


	
   

	
   

	
 0.63 

	
   

	
   

	
 3,637,226 

	
   

	
 75,000 

	
   

	
   


	
   

	
   

	
 0.83 

	
   

	
   

	
 205,000 

	
   

	
 154,875 

	
   

	
   


	
   

	
   

	
 1.00 

	
   

	
   

	
 190,000 

	
   

	
 129,375 

	
   

	
   


	
   

	
   

	
 1.50 

	
   

	
   

	
 213,500 

	
   

	
 139,750 

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   

	
   


	
   

	
   

	
   

	
   

	
   

	
 4,705,726 

	
   

	
 959,000 

	
   

	
   


	
   

	
   

	
   

	
   

	
   

	


	
   

	


	
   

	
   





23










 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 9   – 

	
 SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION:  


	
   

	
   


	
   

	
 Balance sheets: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
 U.S. dollars in thousands 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 a. 

	
 Accounts receivable - other: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Prepaid expenses 

	
   

	
   

	
 79 

	
   

	
   

	
 138 

	
   


	
   

	
   

	
 Prepaid expenses Plenus (note 4b) 

	
   

	
   

	
 403 

	
   

	
   

	
   

	
   


	
   

	
   

	
 Deposits 

	
   

	
   

	
 160 

	
   

	
   

	
 69 

	
   


	
   

	
   

	
 Advances to suppliers 

	
   

	
   

	
 77 

	
   

	
   

	
 47 

	
   


	
   

	
   

	
 Sundry 

	
   

	
   

	
 18 

	
   

	
   

	
 34 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 737 

	
   

	
   

	
 288 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
 b. 

	
 Inventories: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Raw materials and supplies 

	
   

	
   

	
 4,418 

	
   

	
   

	
 2,080 

	
   


	
   

	
   

	
 Products in process 

	
   

	
   

	
 4,244 

	
   

	
   

	
 2,112 

	
   


	
   

	
   

	
 Finished products 

	
   

	
   

	
 8,550 

	
   

	
   

	
 6,800 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 17,212 

	
   

	
   

	
 10,992 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   








	
 

	
 

	
 


	
   

	
 c. 

	
 Restricted deposits  


	
   

	
   

	
   


	
   

	
   

	
 The balance
  at December 31, 2005 and 2004, includes a $1,000 thousand deposit, which
  serves as collateral in favor of long-term bank loan, see note 4a. The
  balance also includes restricted deposits at the amount of $199,000 and
  $70,000, which serve as collateral for the projected rental payments that the
  group is committed to pay at December 31, 2005 and 2004, respectively. 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
 U.S. dollars in thousands 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
 d. 

	
 Accounts payable and accruals - other: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Employees
  and employee institutions 

	
   

	
   

	
 1,216 

	
   

	
   

	
 900 

	
   


	
   

	
   

	
 Accrued
  expenses 

	
   

	
   

	
 1,088 

	
   

	
   

	
 295 

	
   


	
   

	
   

	
 Other 

	
   

	
   

	
 193 

	
   

	
   

	
 190 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 2,497 

	
   

	
   

	
 1,385 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   





24








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued) 


	
 

	
 


	
 NOTE 9   – 

	
 SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued): 








	
 

	
 

	
 


	
   

	
 e. 

	
 Fair value of financial instruments 


	
   

	
   

	
   


	
   

	
   

	
 The
  financial instruments of the Company consist of non-derivative assets - cash
  and cash equivalents and current receivables, and of non-derivative
  liabilities - short-term bank credit and accounts payable and accruals. 


	
   

	
   

	
   


	
   

	
   

	
 In view of
  their nature, the fair value of the financial instruments included in the
  working capital of the Company approximates their carrying value. 


	
   

	
   

	
   


	
   

	
 f. 

	
 Monetary balances in Israeli currency: 








	
 

	
 

	
 

	
 


	
   

	
   

	
 1) 

	
 Composed at
  December 31, 2005: 








	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
 U.S. dollars

in thousands 

	
   


	
   

	
   

	


	
   


	
 Current
  assets 

	
   

	
   

	
 2,291 

	
   


	
   

	
   

	


	


	
   


	
 Current
  liabilities 

	
   

	
   

	
 3,247 

	
   


	
   

	
   

	


	


	
   








	
 

	
 

	
 

	
 


	
   

	
   

	
 2) 

	
 Data
  regarding the exchange rate and the Israeli CPI: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
 Exchange

  rate of one

  dollar 

	
   

	
 Israeli CPI* 

	
   


	
   

	
   

	
   

	


	
   

	


	
   


	
   

	
 At December
  31: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 2005 

	
   

	
   

	
 4.603 NIS 

	
   

	
   

	
 185.05 points 

	
   


	
   

	
 2004 

	
   

	
   

	
 4.308 NIS 

	
   

	
   

	
 180.74 points 

	
   


	
   

	
 2003 

	
   

	
   

	
 4.379 NIS 

	
   

	
   

	
 178.58 points 

	
   


	
   

	
 Increase
  (decrease) during: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 2005 

	
   

	
   

	
         6.8% 

	
   

	
   

	
 2.4% 

	
   


	
   

	
 2004 

	
   

	
   

	
       (1.6)% 

	
   

	
   

	
 1.2% 

	
   








	
 

	
 

	
 *  Based
  on the index for the month ending on each balance sheet date, on the basis of
  1993 average     = 100. 


	
   

	
   

	
   


	
   

	
 Statements of operations: 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 Year ended December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   

	
 2003 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
 U.S. dollars in thousands 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 g. 

	
 Research and development expenses: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Expenses incurred: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Salaries, wages and employee benefits 

	
   

	
   

	
 4,009 

	
   

	
   

	
 3,115 

	
   

	
   

	
 2,707 

	
   


	
   

	
   

	
 Materials consumed 

	
   

	
   

	
 968 

	
   

	
   

	
 698 

	
   

	
   

	
 639 

	
   


	
   

	
   

	
 Subcontractors 

	
   

	
   

	
 1,854 

	
   

	
   

	
 1,991 

	
   

	
   

	
 2,226 

	
   


	
   

	
   

	
 Depreciation and amortization 

	
   

	
   

	
 1,284 

	
   

	
   

	
 240 

	
   

	
   

	
 193 

	
   


	
   

	
   

	
 Other 

	
   

	
   

	
 1,043 

	
   

	
   

	
 999 

	
   

	
   

	
 885 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 9,158 

	
   

	
   

	
 7,043 

	
   

	
   

	
 6,650 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   





25








 NEGEVTECH LTD.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 


	
 

	
 


	
 NOTE 9   – 

	
 SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION (continued): 








	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
   

	
   

	
   

	
   

	
 Year ended December 31 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
 2005 

	
   

	
 2004 

	
   

	
 2003 

	
   


	
   

	
   

	
   

	
   

	


	
   

	


	
   

	


	
   


	
   

	
   

	
   

	
   

	
 U.S. dollars 

	
   


	
   

	
   

	
   

	
   

	


	
   


	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
 h. 

	
 Marketing, general and administrative
  expenses, net: 

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   

	
   


	
   

	
   

	
 Salaries, wages and employee benefits 

	
   

	
   

	
 4,738 

	
   

	
   

	
 2,094 

	
   

	
   

	
 1,574 

	
   


	
   

	
   

	
 Professional fees 

	
   

	
   

	
 4,131 

	
   

	
   

	
 1,090 

	
   

	
   

	
 690 

	
   


	
   

	
   

	
 Depreciation and amortization 

	
   

	
   

	
 647 

	
   

	
   

	
 391 

	
   

	
   

	
 221 

	
   


	
   

	
   

	
 Travel abroad 

	
   

	
   

	
 806 

	
   

	
   

	
 517 

	
   

	
   

	
   

	
   


	
   

	
   

	
 Other 

	
   

	
   

	
 2,610 

	
   

	
   

	
 611 

	
   

	
   

	
 477 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 12,932 

	
   

	
   

	
 4,703 

	
   

	
   

	
 2,962 

	
   


	
   

	
   

	
 L e s s - government participation in
  marketing expenses 

	
   

	
   

	

   


	
   

	
   

	
   

	
   

	
   

	
 40 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	


	
   


	
   

	
   

	
   

	
   

	
   

	
 12,932 

	
   

	
   

	
 4,703 

	
   

	
   

	
 2,922 

	
   


	
   

	
   

	
   

	
   

	


	


	
   

	


	


	
   

	


	



	
   









	
 

	
 


	
 NOTE 10   – 

	
 RELATED PARTIES 
















	
 

	
 


	
   

	
 During
  December 2004, the Company signed an agreement with its founders, see note
  8a(4). 





26







Schedule 2.24  


Negevtech Ltd. 


List of Officers, Employees and Consultants [3]








[***]






*** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 































Schedule 2.25  



Government Sponsored
Programs  



	1.  	Office
of the Chief Scientist  






	 	
On
April 18, 2000 the OCS approved a grant in the amount of NIS 4,262,066 which was fully
provided to the Company. 






	 	
On
April 3, 2001, the OCS approved an additional grant in the amount of NIS 9,972,714 which
was fully provided to the Company. 






	 	
On
July 15, 2002, the OCS approved an additional grant in the amount of NIS 10,217,368 which
was fully provided to the Company. 






	 	
On
June 10, 2003, the OCS approved an additional grant in the amount of NIS 9,499,968 which
was fully provided to the Company. 






	 	
On
June 13, 2004, the OCS approved an additional grant in the amount of NIS 9,000,000 which
was fully provided to the Company. 






	 	
On
May 2, 2005, the OCS approved an additional grant in the amount of NIS 6,800,000 out of
which an amount of NIS 2,173,806 was provided to the Company. 






	 	
On
January 31 ,2006 two new requests were filed for 2006 project, that are still in process.  






	2.  	Fund
for the Encouragement of Marketing Activities  






	 	
On
December 15, 2002, the Fund for the Encouragement of Marketing Activities approved a grant
in the amount of $40,000 which was fully provided to the Company. 






	3.  	Investment
Center  






	 	
On
December 20, 2001 the Company applied for an approved enterprise status from the
Investment Center of the Israeli Ministry of Trade and Industry. Approval was granted on
March 24, 2002. 






	 	
On
October 19, 2004 the Investment Center approved an extension of the plan until March 23,
2005. 






	 	
On
July 27, 2005 the Investment Center approved an extension of the plan until March 23,
2006  



















Schedule 2.28  



List of Insurance
Policies  



Negevtech maintains the following
valid insurance policies: 



	Medical Insurance Policy	 	The policy covers the medical insurance of Israeli employees during their stay abroad for short periods and for relocation periods
	Professional & Product Liability Insurance Policy	$5,000,000	 
	Directors & Officers Liability Insurance Policy	$5,000,000	 
	Marine Cargo Insurance Policy	$5,000,000	 
	Property in business interruption to cover Negevtech Property	$155,000 - $10,000,000	The coverage is for Negevtech Ltd., for more details please see Migdal's Hi-Tech Business Insurance Policy
	Third Party Liability	$5,000,000	 
	Employer Liability	$4,000,000	 
	Employees' Loyalty	$250,000	 
	Electronic Equipment	$50,000 - $700,000	 
	Business and Personal Property Insurance Policy


Commercial Umbrella and Business & Personal Property Insurance policy	$2,500 - $250,000


$5,000,000	The coverage is for Negevtech Inc. and Negevtech Ltd., for more details please See The Hatford's Policy
















Schedule 3.5 A  



Venture Capital Fund  



Poalim Ventures Ltd. 



Poalim Ventures I Ltd. 



Poalim Ventures II L.P. 



Pitango Venture Capital Fund III
(Israeli Sub) L.P.  



Pitango Venture Capital Fund III
(Israeli Sub.) Non-Q L.P.  



Pitango Venture Capital Fund III
(Israeli Investors) L.P.  



Pitango Principles Fund III (Israel)
L.P.  



Pitango Venture Capital Fund II
Trusts 2000 L.P.  



SVE Star Ventures Enterprises Gmbh & Co.
No. IX KG. 



Star Management of Investments No.
II (2000) L.P.  



Star Growth Enterprise, a German
Civil Law Partnership (with limitation of liability) 



Genesis Partners II, L.D.C.  



Genesis Partners II (Israel) L.P.  



Wellington Partners Ventures III
Technology Fund L.P 













Schedule 3.5 B  



Non Israeli Resident  



Intel Atlantic, Inc. 

















Schedule 4.5  




	











March 22, 2006   

Ref: 739/75.60292
	Doron Cohen              

David Cohen              

Tali Yaron-Eldar         

Gladys Fleischer (Keroub)

Moshe Brenner            

Liora Lotenberg          

Glenn Shalom-Winter*     

Asaf Ben-Zeev            

Uriel Barak*             

Yifat Mor*               

Einav Neeman-Gadish      

Rami Eliyahu             

Tal Shank                

Moran Harari             

Rany Schwartz            

                         

* Also member of the     

   New York State Bar














TO: The Investors Listed
on Annex A Hereto 



Dear Sirs: 



Re: Negevtech Ltd.  



        We
have acted as counsel to Negevtech Ltd., a company limited by shares, formed and existing
under the laws of the State of Israel (the “Company”), in connection with
the Series BB Preferred Share Purchase Agreement dated March 22, 2006 (the “Share
Purchase Agreement”) between the Company and yourselves and all the Schedules,
Exhibits and all ancillary documents related thereto (the “Transaction
Documents”). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in the Transaction Documents. 



        In
connection with the opinions set forth below, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of such documents, corporate
records, certificates and other instruments as we have deemed necessary or appropriate for
the purpose of this opinion. In our examination, we have assumed the due execution and
delivery of documents by the parties (other than the Company) thereto (pursuant to due
authorization), the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all documents
submitted to us as certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents and legal capacity of all signatories to such
documents. 



        The
opinions hereinafter expressed are qualified to the extent that the validity or
enforceability of any of the agreements, documents or obligations referred to herein may
be limited by, subject to or affected by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights of creditors
generally, or by statutory or decisional law concerning recourse by creditors to security
in the absence of notice and hearing, or by general equitable principles, or by the
discretionary powers of any court or administrative body. We do not express any opinion
herein as to the availability of any equitable or other specific remedy, including
specific performance, upon breach of any of the agreements, documents or obligations
referred to herein. 




	

	Beit Oz, 14 Abba Hillel Rd., Ramat Gan 52506, Israel n Tel: +972 (3) 753 1000 n Fax: +972 (3) 753 1001
	Email: mail@cohenlaw.co.il  n Web: www.CohenLaw.co.il  

















        Insofar
as this opinion relates to factual matters, information with respect to which is in
possession of the Company, we have relied (without independent investigation) upon the
representations by the Company in the Transaction Documents and on representations or
certificates of, or communications with directors, officers, employees or representatives
of the Company and certain public officials. Except as expressly set forth in this
opinion, we have not undertaken any independent investigation to determine the existence
or absence of such facts. Apart from an examination of the public records of the Israeli
Registrar of Companies, we have not examined any records of any court, administrative
tribunal or other similar entity in connection with our opinions expressed herein. Except
to the extent expressly set forth herein, we have not undertaken any independent
investigation to determine the existence or absence of any fact, and no inference as to
our knowledge of the existence or absence of any fact should be drawn from our
representation of the Company or the rendering of the opinion set forth below. In using
the term “knowledge” or any variation thereof with respect to the existence or
absence of facts we rely solely on representations, certificates or communications as
aforesaid and indicate that during the course of our representation of the Company, no
information has come to our attention that has given us actual knowledge of the existence
or absence of such facts, and such terms refer to the current actual knowledge of the
attorneys of this firm who have worked on matters for the Company. 



        For
purposes of our opinion in paragraph 1 below, we have relied solely upon the Certificate
of Incorporation and Registration as a Private Company issued by the Registrar of
Companies dated 22.12.91 and upon documents filed and held on record with the Registrar of
Companies. 



        For
purposes of our opinion in paragraphs 3 and 4(ii) below, we have relied, inter alia, on
your representations in Section 3 of the Share Purchase Agreement. 



        We
do not represent ourselves as being familiar with the laws of any jurisdiction other than
the laws of the State of Israel. Accordingly, we express no opinion in respect to matters
governed by or construed in accordance with the laws of any jurisdiction other than the
laws of the State of Israel. 



        Based
upon and subject to the foregoing, we are of the opinion that other than as set forth in
the Transaction Documents: 



	1. 	The
Company is a company limited by shares, duly incorporated and validly           existing
under the laws of the State of Israel. The Company has all requisite           corporate
power and authority to own and operate its properties and assets and           to carry
on its business as, to our knowledge, it is presently conducted. 






	2. 	The
Company has all the requisite corporate power and authority to execute,           deliver
and perform the Transaction Documents and to perform its obligations set           forth
therein. The Company has the requisite corporate power and authority to           offer,
issue and sell the Issued Shares to be sold to you pursuant to the Share
          Purchase Agreement. 






	3. 	Each
of the Transaction Documents has been duly authorized by all necessary
          corporate action on the part of the Company, has been executed and delivered by
          duly authorized officers of the Company and constitutes a legal, valid and
          binding obligation of the Company, enforceable against the Company in
accordance           with its terms. No other corporate act or proceeding on the part of
the Company           is necessary for the execution of the Transaction Documents and/or
the           fulfillment of the Company’s obligations under the Transaction
Documents. 






- 2 -







	4. 	The
execution and delivery of the Transaction Documents, the issue and sale of           the
Issued Shares and the performance by the Company of its obligations under           the
Transaction Documents will not conflict with, constitute a violation of,           result
in a breach of any provision of, or constitute a default under, (i) the
          Memorandum or Articles of Association of the Company; or (ii) any applicable
          statute, rule or regulation to which the Company is subject, including
          applicable Israeli securities laws, or (iii) those Material Agreements (as
          defined in Section 2.10(c) of the Share Purchase Agreement) listed as numbers
          29, 30 and 31 in the list of Material Agreements referenced to Section 2.10 of
          the Schedule of Exceptions to the Share Purchase Agreement; or (iv) any
          judgment, decree or order known to us to which the Company is a party or by
          which it is bound, except in relation to subsections (ii), (iii) and (iv) above
          for such conflicts, violations, breaches or defaults that are not reasonably
          likely to have a material adverse effect on the Company and the ability of the
          Company to perform its obligations under the Transaction Documents. Compliance
with the terms of the Transaction Documents does not require the           consent or
agreement of any Israeli government entity (other than the Investment           Center of
the Ministry of Industry, Trade and Labor and the Office of the Chief
          Scientist, the approval in principle of both have been obtained, as set forth
in           the Schedule of Exceptions), nor does it require a filing with any Israeli
          government entity (other than the Registrar of Companies, the Investment Center
          of the Ministry of Industry, Trade and Labor and the Office of the Chief
          Scientist). 






	5. 	The
Issued Shares being purchased by you once issued and paid for in full in
          accordance with the provisions of the Share Purchase Agreement and the Amended
          Articles, will be duly and validly issued, fully paid and non-assessable, and,
          to the best of our knowledge, not issued in violation of any pre-emptive
rights,           and, to the best of our knowledge, you will hold such shares free and
clear of           any liens, security interests, pledges or charges in favor of the
Company,           except as set forth in the Transaction Documents. Upon conversion in
accordance           with the Amended Articles of the Issued Shares being purchased by
you when fully           paid, the Ordinary Shares into which the Issued Shares are
convertible will be           duly authorized, validly issued, fully paid, and non
assessable, and, to the           best of our knowledge, will not be issued in violation
of any preemptive rights           existing as of the date hereof.






	6. 	As
of the Closing, the authorized share capital of the Company is NIS 855,700
          divided into six (6) classes of shares: 47,000,996 Ordinary Shares, nominal
          value NIS 0.01 each, 1,569,004 Ordinary-Preferred Shares, nominal value NIS
0.01           each, 15,000,000 Series AA Preferred Shares, nominal value NIS 0.01 each,
          12,137,708 Series BB-1 Preferred Shares, nominal value NIS 0.01 each, 4,000,000
          Series BB-2 Preferred Shares, nominal value NIS 0.01 each and 5,862,292 Series
          BB-3 Preferred Shares, nominal value NIS 0.01 each. Based on a review of the
          Company’s records and shareholder register, the issued and outstanding
          share capital of the Company immediately prior to the Closing and the changes
in           the Company’s share capital is 428,949 Ordinary Shares, nominal value
NIS           0.01 each, 1,569,004 Ordinary-Preferred Shares, nominal value NIS0.01 each,
          13,144,070 Series AA Preferred Shares, nominal value NIS 0.01 each, 9,014,548
          Series BB-1 Preferred Shares, nominal value NIS 0.01 each and 3,597,106 Series
          BB-2 Preferred Shares, nominal value NIS 0.01 each. All such issued and
          outstanding shares have been duly authorized, validly issued, and to the best
of           our knowledge, are free of any liens or encumbrances in favor of the
Company,           except as set forth in the Transaction Documents. To the best of our
knowledge           on the basis of our review of the documents provided to us by the
Company           (except with respect to options granted pursuant to the Company’s
share           option plans and shares issued upon exercise thereof, in respect of which
we           have relied solely on representations made by certain officers of the
Company),           and except as disclosed in the Transaction Documents, there are not
as of the           date hereof, any outstanding or authorized subscriptions, options,
warrants,           calls, rights, commitments (including conversion or pre-emptive
rights), or any           other agreements of any character directly obligating the
Company to issue (a)           any additional shares, except that we express no opinion
as to the number of           shares issuable in respect of the anti-dilution rights of
any of the classes of           shares of the Company in connection with the Share
Purchase Agreement or as a           result of the issuance of the Issued Shares; or (b)
any securities convertible           into, or exchangeable for, or evidencing the right
to subscribe for, any shares.           To the best of our knowledge, except as disclosed
in the Transaction Documents,           the Company has not adopted or authorized any
plan for the benefit of its           officers, employees, or directors which requires or
permits the issuance, sale,           purchase, or grant of any shares of the Company’s
share capital or any           securities convertible into, or exercisable or
exchangeable for, or evidencing           the right to subscribe for any such shares. 






- 3 -







	7. 	All
necessary corporate proceedings have been taken to adopt the Amended           Articles
as they appear in Exhibit A of the Share Purchase Agreement, and such           Amended
Articles were validly adopted. 






	8. 	Except
as set forth in the Transaction Documents, we do not know of any civil,
          criminal or arbitration proceedings pending before any court or administrative
          agency to which the Company is party, nor is there in any investigation pending
          or threatened against the Company being handled by us. 






This opinion is being furnished only
to you and is solely for your benefit in connection with the Transaction Documents. This
opinion may not be relied upon by you for any other purpose nor may this opinion be
provided to or relied upon by any other person or entity or published, quoted or otherwise
used for any other purpose without our prior written consent. This opinion is based on the
law (and the interpretations thereof) and facts existing as of the date hereof. We
disclaim any obligations to advise you of any changes therein that may be brought to our
attention after the date hereof. Please note that we are opining only as to the matters
specifically and expressly set forth herein and no opinion should be inferred as to any
other matters. 



		
		
		
		
		
	 	Sincerely yours,
	 
	 	Cohen, Cohen, Yaron-Eldar & Co.
	 	Law Offices






- 4 -







SCHEDULE A  



List of Investors  



	Investor
	SVE Star Ventures Enterprises GmbH & Co. No. IX KG.
	Star Management of Investments No. II (2000) L.P.
	Star Growth Enterprise, a German Civil Law Partnership (with limitation of Liability)
	Poalim Ventures Ltd.
	Poalim Ventures I Ltd.
	Poalim Ventures II L.P.
	Genesis Partners II, L.D.C.
	Genesis Partners II (Israel) L.P.
	Pitango Venture Capital Fund III (Israeli Sub) L.P.
	Pitango Venture Capital Fund III (Israeli Sub.) Non-Q L.P.
	Pitango Venture Capital Fund III (Israeli Investors) L.P.
	Pitango Principles Fund III (Israel) L.P.
	Pitango Venture Capital Fund II Trusts 2000 L.P.
	Intel Atlantic, Inc.
	Wellington Partners Venture III Technology Fund L.P.






- 5 -










Schedule 4.10  



Officer Certificate  



	To:  	The
Investors Listed on Schedule A hereto (the "Investors")  






	From:  	Arnon
Gat - chief executive officer of Negevtech Ltd. (the "Company")  






	Re:  	Officer’s
Certificate Pursuant to Section 4.10 to the Preferred Share Purchase Agreement by and between the Company and the Investors dated March_______, 2006
(the
“Agreement”) 








I, the undersigned, in my capacity as
chief executive officer of the Company, hereby certify the following: 



	1.  	The
representations and warranties contained in Section 2 of the Agreement are
               true as of the date hereof. 






	2.  	The
Company has performed and complied with all the agreements, obligations and
               conditions contained in the Agreement that are required to be performed or
               complied with on or before the Closing (as defined in the Agreement). 






	3.  	There
has been no material adverse change in the financial or business condition
               of the Company from the date of the Agreement until the date hereof. 






	4.  	As
of the date hereof, there is no action, suit, or proceeding pending or
               threatened before any court or quasi-judicial or administrative agency of
any                state, municipal, or foreign jurisdiction or before any arbitrator
wherein an                unfavorable injunction, judgment, order, decree, ruling, or
charge would: (i)                prevent consummation of any of the transactions
contemplated by the Agreement;                (ii) cause any of the transactions
contemplated by the Agreement to be rescinded                following consummation 






IN
WITNESS WHEREOF, I have executed this certificate on this __ day of March 2006. 




			——————————————

Chief Executive Officer of Negevtech Ltd.















Schedule 4.12  



To

Mr. ALBERT JOSEPH MARKUS

Am Fichtenhain12

82336 Berg

Germany

_________________




Dear Sir, 



Re: Indemnification
and Release  



This letter is being issued to you
pursuant to the resolutions adopted by the Board of Directors of Negevtech Ltd. (the
“Company”) on August 25, 2005, and by the shareholders of the Company on
September 12, 2005. 



	1.  	The
Company hereby undertakes to indemnify you to the maximum extent permitted
               by applicable law in respect of: 






	 	1.1 	Any
financial oligation imposed on you in favor of any other person and/or entity pursuant to
any judgment including any judgment by way of compromise or any judgment of an arbitrator
certified by a competent court within the framework of any legal proceedings taken
against you, if any, due to any act or omission (collectively hereinafter referred to as
an “Action”) taken or not taken, or made or not made, by you in your capacity
as an Office Holder of the Company (as such term is defined in the Israeli Companies Law,
1999, as amended (the “Companies Law”); 






	 	1.2 	All
reasonable litigation expenses, including, but not limited to, attorney’s fees and
the fees and expenses of investigators, accountants and other experts, which you may pay,
or be obligated to pay by the court, (i) in relation to the opposing by you of any legal
proceedings, which are instituted against you by the Company or in its name or by any
other person; or (ii) in any criminal proceedings in which you are acquitted; or (iii) in
any criminal proceedings regarding a crime which does not require proof of mens rea
 (criminal intent) in which you are convicted; or (iv) in any administrative or
investigative proceedings that do not result in criminal proceedings against you and
without any monetary liability being imposed on you in lieu of criminal proceedings or
that result in criminal proceedings in which you are acquitted, or (v) in any
administrative or investigative proceedings that do not result in criminal proceedings
against you but result in the imposition of a monetary liability in lieu of criminal
proceedings provided it is in respect of a criminal action that does not require proof of
criminal intent; or (vi) in preparation or defense with respect to any threatened or
pending proceedings as aforesaid; all to the extent permitted pursuant to the Companies
Law and in respect of actions taken by you in your capacity as an Office Holder of the
Company 














	 	
The
above indemnification will also apply to any action taken by you in your capacity as an
Office Holder of any other company controlled, directly or indirectly, by the Company or
in fulfilling the position of an Office Holder and/or and observer at the board of
directors’ meetings of any other entity at the request of the Company (each of the
aforesaid entities shall be referred to hereinafter as an “Affiliate”). 






	2.  	The
Company will not indemnify you for any amount you may be obligated to pay in
          respect of: 






	 	2.1 	A
breach of your duty of loyalty to the Company; provided, that the Company will
indemnify you for a breach of your duty of loyalty if in committing such breach you acted
in good faith and had reasonable grounds to assume that your action would not harm the
Company. 






	 	2.2 	A
breach of your duty of care to the Company committed intentionally or recklessly. 






	 	2.3 	An
action taken with the intent of unlawfully realizing personal gain. 






	 	       2.4 	A
fine or penalty imposed upon you.






	 	2.5 	A
counterclaim made by the Company or in its name in connection with a claim against the
Company filed by you, other than for indemnification hereunder. 






	3.  	The
Company will make available all amounts needed in accordance with paragraph
               1 above on the date on which such amounts are first payable by you (“Time
               of Indebtedness”), and with respect to items referred to in paragraph
1.2                above, on an ongoing basis, as and when payable by you, even prior to
a court                decision, and in any event within five (5) business days from your
first written                request. Advances given to cover legal expenses in criminal
proceedings or in                administrative or investigative proceedings that result
in criminal proceedings                will be repaid by you to the Company if you are
found guilty (other than with                respect to criminal proceedings regarding a
crime which does not require proof                of criminal intent). 






	 	
As
part of the aforementioned undertaking, the Company will make available to you any
security or guarantee that you may be required to post in accordance with an interim
decision given by a court or an arbitrator, including for the purpose of substituting
liens imposed on your assets.  






- 2 -







	 	
All
amounts paid as indemnification pursuant hereto will be grossed-up to cover any tax
payments you may be required to make if the indemnification payments are taxable to you.  






	4.  	The
Company will indemnify you even if at the relevant Time of Indebtedness you
               are no longer an Office Holder of the Company or of an Affiliate or board
               observer of an Affiliate, provided that the obligations are in respect of
               actions taken by you while you were an Office Holder and/or board
observer, as                aforesaid, and in such capacity, including if taken prior to
the above                resolutions, and the indemnity will extend to your heirs,
executors,                administrators and legal representatives. 






	5.  	The
indemnification is limited to the following categories of events relating
               to: 






	 	5.1	The
offering of securities by the Company and/or by a shareholder to the public and/or to
private investors or the offer by the Company to purchase securities from the public
and/or from private investors or other holders pursuant to a prospectus, agreements,
notices, reports, tenders and/or other proceedings. 






	 	5.2	Occurrences
resulting from the Company’s becoming or its status as a public company, and/or from
the fact that the Company’s securities were offered to the public and/or are traded
on a stock exchange, whether in Israel or abroad. 






	 	5.3	Occurrences
in connection with investments the Company and/or Affiliates make in other corporations
whether before and/or after the investment is made, entering into the transaction, the
execution, development and monitoring thereof, including actions taken by you in the name
of the Company and/or an Affiliate as an Office Holder and/or board observer of the
corporation the subject of the transaction and the like. 






	 	5.4	The
sale, purchase and holding of negotiable securities or other investments for or in the
name of the Company and/or an Affiliate. 






	 	5.5	Actions
in connection with the merger of the Company and/or an Affiliate with or into another
entity, the sale of any, including all, or substantially all, of the Company’s
and/or an Affiliate’s assets (which inlcude, inter-alia, operations and/or
business), a Tender Offer, a Forced Sale of Shares, Arrangement and Compromise (as such
capitalized terms are defined in the Companies Law) or any reorganization, merger or
consolidation of whatever kind or nature within the meaning of any law applicable to such
claim or demand. 






	 	5.6	Without
derogating from the generality of the above, actions in connection with the purchase,
lease or sale of companies, legal entities, business, securities or assets, and the
division or consolidation thereof. 






- 3 -







	 	5.7	Actions
taken in connection with labor relations and/or employment matters in the Company and/or
in Affiliates and trade relations of the Company and/or Affiliates, including with
employees, independent contractors, customers, suppliers and various service providers. 






	 	5.8	Actions
in connection with the testing of products developed by the Company and/or by Affiliates
or in connection with the certification, distribution, sale, license or use of such
products. 






	 	5.9	Actions
taken in connection with the intellectual property of the Company and/or an Affiliate and
its protection, including the registration or assertion of rights to intellectual
property and the defense of claims related to intellectual property. 






	 	5.10	Actions
taken pursuant to or in accordance with the policies and procedures of the Company and/or
its Affiliates, whether such policies and procedures are published or not. 






	 	5.11 	The
obligation to disclose information to shareholders of the Company (whether past, current
or prospective). 






	 	5.12 	Dealings
by the Company and/or an Affiliate with third parties, including agents, employees,
customers, suppliers, creditors or others. 






	 	5.13 	Presentations
or reports submitted or delivered to shareholders (whether current or prospective),
customers or creditors of the Company. 






	 	5.14 	Any
matter relating to financial reports, accounting or book-keeping of the Company and/or an
Affiliate or failure to pay, report or keep any foreign, federal, state, county, local,
municipal or city taxes or other mandatory payment. 






	 	5.15 	Any
claim or demand made by any third party suffering any personal injury or damage to
business or personal property through any Action attributed to the Company and/or an
Affiliate, or their respective employees, agents or other persons acting or allegedly
acting on their behalf. 






	 	5.16 	Any
administrative, regulatory or judicial actions, orders, decrees, suits, demands, demand
letters, directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation by any governmental entity, including the Office of the Chief
Scientist or the Investments Center of the Israeli Ministry of Industry, Trade and Labor,
the Israeli Antitrust Authority or the Israel Securities Authority, or other person
alleging the failure to comply with any statute, law, ordinance, rule, regulation, order
or decree of any governmental entity applicable to the Company or any of its Affiliates,
or any of their respective businesses or operations.  






- 4 -








	6.  	The
total amount of indemnification that the Company undertakes towards all           persons
whom it has resolved to indemnify for the matters and in the           circumstances
described herein, jointly and in the aggregate, shall not exceed           the greater
of: 








	 	(a) 	An
amount equal to $10 Million US Dollars, according to the representative rate
               of exchange, or any other official rate of exchange that may replace it,
at the                Time of Indebtedness; or 






	 	(b) 	The
amount adjudicated against you jointly and severally with others. 






	 	(c) 	The
amount adjudicated against you subject to the limitations in paragraphs 6(a)
               and 6(b) above (the greater of the two) plus the amount adjudicated
against                others if their portion is not collected for any reason. 






	7.  	The
Company will not indemnify you for any liability with respect to which you
               have received payment by virtue of an insurance policy or another
               indemnification agreement other than for amounts which are in excess of
the                amounts actually paid to you pursuant to any such insurance policy or
other                indemnity agreement (including deductible amounts not covered by
insurance                policies), within the limits set forth in paragraph 6 above. 






	8.  	Subject
to the provisions of paragraphs 6 and 7 above, the indemnification will,
               in each case, cover all sums of money (100%) that you will be obligated to
pay,                in those circumstances for which indemnification is permitted under
the law. 






	9.  	The
Company will be entitled to any amount collected from a third party in
               connection with liabilities indemnified hereunder and which are in excess
of the                amount, if any, not indemnified by the Company. 






	10.  	In
all indemnifiable circumstances indemnification will be subject to the
               following: 






	 	10.1 	You
shall notify the Company of any legal proceedings initiated against you and of all
possible or threatened legal proceedings within seven (7) days from the day that you are
dully and lawfully first aware thereof, and that you transfer to the Company, or to such
person as it shall advise you, without delay all documents you receive in connection with
these proceedings. 






	 	
Similarly,
you must advise the Company on an ongoing and current basis concerning all events which
you suspect may give rise to the initiation of legal proceedings against you. 






	 	
Failure
to notify the Company as aforesaid will not relieve the Company of its indemnification
obligations pursuant hereto except to the extent that it has been actually prejudiced as
a result of such failure. 






- 5 -







	 	10.2 	Other
than with respect to proceedings that have been initiated against you by the Company or
in its name, the Company shall be entitled to undertake the conduct of your defense in
respect of such legal proceedings and/or to hand over the conduct thereof to any attorney
which the Company may choose for that purpose. 






	 	
In
the event that: (i) such attorney is not, upon reasonable grounds, acceptable to you,
(ii) the Company shall have not assumed the defense of the legal proceedings or has not
pursued the defense diligently, or (iii) the named parties to any such legal proceeding
include both you and the Company, and it is reasonably concluded that joint
representation is inappropriate under applicable standards of professional conduct due to
a conflict of interest between yourself and the Company, you will be entitled to appoint
an attorney of your own that shall accompany you in such procedure. Your attorney shall
be fully updated on the defense procedure, and the Company and the attorney conducting
the legal defense on behalf of the Company shall fully cooperate with your attorney,
including regularly consulting with your attorney on the measures taken in the course of
the defense. The Company shall indemnify you for all reasonable expenses incurred by you
in connection with engaging such attorney. 






	 	
The
Company and/or the attorney as aforesaid shall be entitled, within the context of the
conduct as aforesaid, to conclude such proceedings, all as it shall see fit, including by
way of compromise. At the request of the Company, you shall execute all documents
required to enable the Company and/or its attorney as aforesaid to conduct your defense
in your name, and to represent you in all matters connected therewith, in accordance with
the aforesaid. 






	 	
For
the avoidance of doubt, in the case of criminal proceedings the Company and/or the
attorneys as aforesaid will not have the right to plead guilty in your name or to agree
to a plea-bargain in your name without your consent. Furthermore, in a civil proceeding
(whether before a court or as a part of a compromise arrangement), the Company and/or its
attorneys will not have the right to admit to any occurrences that are not indemnifiable
pursuant to this Letter of Indemnification and Release and/or pursuant to law, or to
enter into any settlement, or compromise or consent to any judgement unless such
settlement, compromise or consent includes an unconditional release of you from all
liability arising out of the proceeding, without your consent. However, the aforesaid
will not prevent the Company and/or its attorneys as aforesaid, with the approval of the
Company, to come to a financial arrangement with a plaintiff in a civil proceeding
without your consent so long as such arrangement will not be an admittance of an
occurrence not indemnifiable pursuant to this Letter of Indemnification and Release
and/or pursuant to law and so long as it includes an unconditional release as aforesaid. 






- 6 -







	 	10.3 	You
will cooperate with the Company and/or any attorney as aforesaid in every reasonable way
as may be required of you within the context of their conduct of such legal proceedings,
provided that the Company shall cover all costs incidental thereto such that you will not
be required to pay the same or to finance the same yourself. 






	 	10.4 	If,
in accordance to paragraph 10.2, the Company has taken upon itself the conduct of your
defense, the Company will have no liability or obligation pursuant to this Letter of
Indemnification and Release or the above resolutions to indemnify you for any legal
expenses, including any legal fees, that you may expend in connection with your defense,
except as provided for in paragraph 10.2 above. 






	 	10.5 	The
Company will have no liability or obligation pursuant to this Letter of Indemnification
and Release or the above resolutions to indemnify you for any amount expended by you
pursuant to any compromise or settlement agreement reached in any suit, demand or other
proceeding as aforesaid if the Company’s consent to such compromise or settlement
was not given in advance, such consent not to be unreasonably withheld. 






	11.  	The
Company hereby exempts you and releases, to the fullest extent permitted by
                    law, from and against any liability for monetary or other damages due
to, or                     arising or resulting from a breach of your duty of care to the
Company, provided                     that in no event shall you be exempt with respect
to any actions listed in                     paragraph 2 above. 






	12.  	If
for the validation of any of the undertakings in this Letter of
                    Indemnification and Release any act, resolution, approval or other
procedure is                     required the Company undertakes to cause them to be done
or adopted in a manner                     which will enable the Company to fulfill all
its undertakings as aforesaid. 






	13.  	For
the avoidance of doubt, it is hereby clarified that nothing contained in
                    this Letter of Indemnification and Release or in the above
resolutions derogate                     from the Company’s right to indemnify you
post factum for any amounts which                     you may be obligated to pay as set
forth in paragraph 1 above without the                     limitations set forth in
paragraphs 5 and 6 above. 






	14.  	If
any undertaking or release included in this Letter of Indemnification and
                    Release is held invalid or unenforceable, such invalidity or
unenforceability                     will not affect any of the other undertakings or
releases which will remain in                     full force and effect. Furthermore, if
such invalid or unenforceable undertaking                     or release may be modified
or amended so as to be valid and enforceable as a                     matter of law, such
undertakings or releases will be deemed to have been                     modified or
amended, and any competent court or arbitrator are hereby authorized
                    to modify or amend such undertaking or release, so as to be valid and
                    enforceable to the maximum extent permitted by law. 






- 7 -







	15.  	This
Agreement shall be construed in accordance with and governed by the laws of
                    the State of Israel, without giving effect to rules of conflicts of
laws. The                     exclusive jurisdiction concerning any legal proceeding
arising between the                     parties concerning this agreement shall vest in
the competent court in the                     district of Tel Aviv. 






	16.  	The
Company shall bear all of your costs, including legal expenses, in enforcing
                    this Letter of Indemnification and Release against the Company. 






	17.  	This
Letter of Indemnification and Release contains the entire agreement and
                    understanding between the Company and yourself in respect of the
subject matter                     hereof and terminates and replaces any previous
agreement in such respect,                     provided however, that no previous
exemption or release (as opposed to indemnity                     undertakings) given to
you from and against any liability for monetary or other                     damages due
to, or arising or resulting from a breach of your duty of care to                     the
Company shall be affected. 






			Sincerely,

Negevtech Ltd.








- 8 -








Schedule 8.3  



Broker’s Fee  



     1)
          Portalium Ltd. is entitled to a cash fee equal to 2.38% (plus VAT if applicable)
          of the total investment amount that Wellington will actually invest in the
          Company. 



     2)
          Ntra Economic Advisors Ltd. is entitled to a cash fee equal to 4% (plus VAT if
          applicable) of the total investment amount that Wellington will actually invest
          in the Company. 














Schedule of Exceptions



Corresponding to the



PREFERRED SHARE
PURCHASE AGREEMENT 


Dated as of March 22, 2006




By and Among




Negevtech Ltd.




And




Several Investors














 The following information in any of
the sections is provided for the purposes of disclosure pursuant to the Preferred Share
Purchase Agreement (the “Series BB-3 SPA”) only, and does not grant, and
should not be interpreted as granting, any rights to any third parties. Each Section is
intended to relate to the corresponding Section of the Preferred Share Purchase Agreement.
Certain disclosure information may be categorized in one section and not another. When the
same disclosure information would be required in more than one section of these Disclosure
Schedules, the Company has included the disclosure information in each section or provided
an appropriate cross-reference to the section in which the disclosure is contained, except
where the relevancy of such disclosure would be readily apparent. 



 All capitalized terms used in any of
the Sections and not otherwise defined shall have the meanings assigned to them in the
Preferred Share Purchase Agreement. 



 Unless otherwise indicated, all
information included is provided as of the date of the Preferred Share Purchase Agreement. 













	 Section 2.1: 	
The Company does not have a business license (“Rishayon Esek”). The
Company believes that the lack of such license does not have a Material Adverse Effect on
its business.  






	 Section 2.2: 	
The number of allocated shares under the Share Option Plans as set forth in Section 2.2
of the Series BB SPA (4,313,226): (i) does not include an aggregate of 87,791 options
reserved for TICI Software Systems Ltd. (which the Company was informed were assigned to
Taldor – Tici Software Systems Ltd.) and an aggregate of 32,769 options reserved for
certain services providers (see breakdown of the options to services providers below);
(ii) does not take into account options returned to the pool upon termination of
employment of certain employees of the Company; and (iii) reflects allocations pursuant
to the IL Plan only. Accordingly, the aggregate number of shares allocated to employees,
consultants and service providers under the IL Plan is 4,433,786 and an aggregate of
913,777 are available for further issuances under the IL Plan, immediately after Closing
(following the increase in the number of shares reserved for future allocation). The
foregoing does not include 197,500 Ordinary Shares issued upon exercise of options
granted to employees of the Company. Under the US Plan, 362,000 options were allocated
and immediately after Closing, 243,000 shall be available for future allocation. These
numbers are set forth in the Board and Shareholder resolutions approving the increase in
the number of shares reserved for purposes of the Company’s Share Option Plans.  






	 	
The
Company’s outstanding shares confer upon their holders certain pre-emptive rights,
anti-dilution rights and registration rights as set forth in the Company’s Articles
of Association in effect prior to Closing (the “Current Articles”), the
Shareholders Rights Agreement dated September 13, 2005 (the “SRA”), the
Series BB Preferred Share Purchase Agreement dated September 13, 2005 (the “Series
BB-1/2 SPA”) and the Second Amendment of the Transition Agreement dated September
13, 2005 (the “Second  Amendment”). Following the Closing, any
pre-emptive rights, anti-dilution rights and registrarion rights attached to the
Company’s shares or granted to holders of such shares shall be set forth in the
Second Amendment, the SRA (as amended by the First Amendment to Shareholders Rights
Agreement) and the Amended Articles (all as defined in the Series BB-3 SPA). 






	 	
The
outstanding Ordinary-Preferred Shares confer upon their holders certain rights as set
forth in the Current Articles and in the Second Amendment to the Transition Agreement
entered into between the Company, Dr. Gadi Neumann and Mr. David Alumot (the “Founders” and,
including the amendments thereto, the “Transition Agreement”). Dr. Gadi
Neumann is also a director of the Company.  






	 	
Certain
of these rights will be amended as provided for in the Series BB-3SPA and in the
First Amendment to Shareholders Rights Agreement and in the Amended Articles (as defined
therein).  








	 	
Pursuant
to the terms of the Employment Agreement and the Option Agreement entered into by the
Company and Arnon Gat, the Company’s CEO and a director of the Company, in December
2004 (collectively, “Arnon’s Agreements”), Arnon Gat is entitled to
certain acceleration rights as set forth therein. Mr. Gat was also entitled to certain
anti-dilution rights that were fully granted, as set forth in the list of security holders
of the Company (Schedule 2.2 to the Series BB-3 SPA). 






- 2 -







	 	
Pursuant
to the terms of Warrants issued on January 14, 2005, July 18, 2005 and November 6, 2005 to
Plenus Technologies Ltd., exercisable, in accordance with their terms, into 1,556,437
Series BB-1 Preferred Shares (“Plenus”, “Plenus
Warrants”), the shares issuable upon exercise of the Plenus Warrants confer upon
the holders thereof certain pre-emptive rights and registration rights. 






	 	
The
Preferred Shares and the Ordinary-Preferred Shares of the Company may be converted into
Ordinary Shares of the Company as set forth in the Current Articles. Following the
Closing, the Series AA, BB-1, BB-2 and BB-3 Preferred Shares and the Ordinary-Preferred
Shares of the Company may be converted into Ordinary Shares of the Company as set forth in
the Amended Articles. 






- 3 -








	 	
See
Schedules 2.2 and 2.2(a) to the Series BB-3 SPA (including the footnotes set forth
therein). 






	 	
SESO
S.A.  provided  Dr. Gadi  Neumann  with a power of attorney to exercise all of its
                         rights as a shareholder. 






	 	
Proxies
were executed in favor of the trustees under the Company’s Stock Option Plans by all
grantees under such Plans. 






	 	
The
32,769 warrants to service providers are comprised of the following warrants:


Irit Cohen – a warrant to purchase 7,015 Ordinary Shares;

Doron Cohen – a warrant to purchase 7,015 Ordinary Shares;

Giora Lentz – a warrant to purchase 10,923 Ordinary Shares;

Yuval Horn – a warrant to purchase 3,507 Ordinary Shares;

Doron Cohen – David Cohen, Law Office – a warrant to purchase 4,309 Ordinary Shares.  










	 	
The
197,500 Ordinary Shares held by Eli Lerner, CPA (trustee under the Company’s IL Share
Option Plan) are a result of the exercise by the following employees:


Doron Schlumm – exercised 2,500 options;

Hava Shapira – exercised 1,000 options;

Shai Silberstein – exercised 20,000 options;

Shula Mazor – exercised 5,000 options;

Offer Saig – exercised 1,000 options;

Ran Yam – exercised 5,000 options;

Mark Wagner – exercised 160,000 options;

Tidhar Mor – exercised 3,000 options. 










	 	
Two
additional employees of the Company exercised options as follows: Silvi Levi (18,750) and
Shiri Bloom (8,250 options). Such exercise and the issuance of Ordinary Shares in
connection therewith were not yet reported to the Companies Registrar and are not
reflected in Eli Lerner’s holdings as set forth in Schedule 2.2 of the Series BB-3
SPA. 






	 	
The
Board resolved to issue to Tmura – the Israeli Public Service Venture Fund a warrant
to purchase up to 5,000 Ordinary Shares of the Company at an exercise price of $0.63 each,
as a charitable contribution. Such issuance is pending the adoption of the Amended
Articles and is not reflected in Schedule 2.2 of the Series BB-3 SPA. 






	 Section 2.3: 	 
Subsection (a)  






	 	
SESO
S.A. has provided Mr. Gad Neumann with a power of attorney to exercise all of its rights
as a shareholder. 






- 4 -








	 	
All
grantees under the Company’s Share Ownership and Option Plan (2001, as amended 2003
& 2004 & 2005) (the “IL Plan”) have provided Mr. Eliahu Lerner
and/or Mr. Yehuda Zviel with a proxy for the exercise of all rights granted to them with
respect to their shares and options, including voting rights, until the consummation of
an IPO. All grantees under the Company’s Employee Share Option Plan (2002) (the
“US Plan”) have provided Wilson, Sonsini, Goodrich & Rosati with a
proxy for the exercise of all rights granted to them with respect to their shares and
options, including voting rights, until the consummation of an IPO.  






	 	
See
also the Current Articles, the Series BB-1/2 SPA, the SRA, , with respect to appointment
of directors and observers.  






	 	
During
the Term of the Plenus Loan Agreement, Plenus is entitled to nominate a non-voting
observer to the Board of Directors of the Company.  






	 	
Pursuant
to the Intel Side Agreement dated July 31, 2002, Intel is entitled to appoint a
non-voting observer to the Board of Directors of the Company and all committees thereof.  






	 	 
Subsection
(b)  






	 	
The Company
has contracted to provide its directors and the directors of its wholly-owned subsidiary,
Negevtech, Inc. (the “Subsidiary”), with Directors and Officers
liability insurance with a coverage limit of US$5 million.  






	 	
The Company
provided its directors with Indemnification and Release Letters with respect to acts or
omissions taken or not taken in their capacity as directors and officers of the Company.
In addition, the Founders and Arnon Gat received complementary Indemnification and
Release Letters as Service Providers of the Company.  






	 	
Haim Russo
(previously director of the Company) and Rafi Yizhar, (currently a director of the
Company), were granted options to purchase Ordinary Shares of the Company, according to
Option Agreements dated December 31, 2002. The Option Agreement with Haim Russo was
amended in December 2004. Subject to Closing, the Company granted Rafi Yizhar additional
options to purchase 40,000 Ordinary Shares.  






	 	
The
Company is a party to the Transition Agreement (as amended) with the Founders.  






	 	
The Company
is a party to Arnon’s Agreements and the Company’s US Subsidiary is a party to
a Services Agreement with AGS Associates LLC, a limited liability company
registered under the laws of Delaware (wholly-owned by Arnon Gat) dated December 2004.  








- 5 -







	 	
In addition
to the foregoing, the Company entered into employment agreements with each of the
following officers of the Company (and with respect to Glyn, Roi, Markus and Yanki – of
a subsidiary of the Company):  






	   	 u 	 Rivi
Sherman, dated September 23, 2003 as amended on November 1, 2003 and February 18, 2005; 






	   	                          u 	 Michal
Rozenkrantz, dated December 15, 2004; 






	   	 u 	 Moti
Gatenio, dated June 7, 2001, as amended on August 1, 2003, on January 1, 2005 and on
January 1, 2006; 






	   	 u 	 Oz
Desheh, dated April 5, 2004, as amended on January 1, 2005, on April 1, 2005 and on
January 1, 2006; 






	   	 u 	 Yuval
Levin, dated September 9, 2002, as amended effective as of April 1, 2005;  






	   	                    u 	 Dvir
Harmelech, dated August 2, 2005; 






	   	                     u 	 Shmuel
Gov, dated February 15, 2006; 






	   	 u 	 The
Company’s US Subsidiary entered into an agreement with its officer Glyn Davies,
dated November 15, 2004; 






	   	 u 	 The
Company’s Japan Subsidiary entered into an agreement with its officer Roi Shefts,
dated January 6, 2005; 






	   	 u 	 The
Company’s German Subsidiary entered into an agreement with its officer Markus
Kindler, dated May 17, 2005; 






	   	 u 	 The
Company’s Taiwan branch entered into an agreement with its officer Yanki Avni, dated
October 31, 2005, effective as of March 1, 2006. 






	 	
In
addition, the abovementioned officers received options to purchase Ordinary Shares of the
Company pursuant to Option Agreement with each such officer, except that Roi, Shmuel and
Markus did not yet sign an Option Agreement. 






	 Section 2.4: 	
            The Company's Singapore subsidiary registered a branch in Taiwan. 






	 	
The
Company incorporated a subsidiary in Japan according to the Board of Directors’
resolution from May 10, 2005. 






	 	
The
Company incorporated a subsidiary in Germany according to the Board of Directors’
resolution from February 8, 2005. 






	 	
The
board of directors of the Company’s subsidiary in Singapore resolved on February 22,
2006 to incorporate a wholly owned subsidiary in Korea. The proceedings for incorporation
of the subsidiary in Korea have not yet been completed. The Company is not a participant
in any registered partnership or joint venture. 

The Company is not participating in any
other partnership, joint venture or business association, other than those listed on the
List of Material Agreements hereof. 






- 6 -







	 Section 2.5: 	
The Company received the approval in principle of the Office of the Chief Scientist of
the Ministry of Industry, Trade and Labor (“OCS”) and the Investment
Center of the Ministry of Industry, Trade and Labor (the “Investment Center”)
for the current investment of the Investors.  






	 	
Pursuant
to the letters received by the Company from the OCS and Investment Center, in order to
receive the final approval of the Investment Center and the OCS, the Company must provide
them with a lawyer/accountant approval with respect to the new ownerships composition. In
addition, the Company must provide the OCS with undertakings signed by each foreign
investor to comply with the provisions of the Research Law (as defined below). 






- 7 -







	 Section 2.7: 	 (a) 	
 In July, August and March 2005, the Company received letters from KLA–Tencor
asserting that its 302 inspection system makes use of five KLA patents and requesting
technical information regarding the 302 system. In response to these letters, the Company
has identified certain limitations of the KLA patents that are absent from the 302
system. The Company also requested further clarification of KLA’s claims. The
Company disputes KLA’s claims and is attempting to resolve these issues without
resorting to litigation, although these assertions by KLA-Tencor could lead to patent
litigation.  









	   	                             (b) 	 On
August 27,  2004,  Applied  Materials,  Inc.  filed suit in the U.S.  District Court for
the Northern  District of  California  alleging  that the Company's 302 inspection system
infringes an Applied Materials’ patent (U.S. Patent No. 5,982,921) and seeking an
injunction and unspecified damages. On October 12, 2004, the Company filed an amended
answer to Applied Materials’ complaint and also filed counterclaims for declaratory
judgment of non-infringement and invalidity. The Company disputes Applied Materials’claims
and further believes that some or all of the claims of the ‘921 patent are invalid.


On April 15, 2005, Applied Materials filed a motion for summary judgment that the Company
is barred from challenging the validity of the ‘921 patent under the legal doctrine
of assignor estoppel. On July 14, 2005, the Court granted Applied Materials’motion.
The Company, therefore, is barred from challenging the validity of the ‘921 patent
in the California litigation. The Company is not barred, however, from seeking
reexamination of the ‘921 patent by the United States Patent and Trademark Office (“PTO”).  






	 	
On
June 3, 2005, the Company filed with the PTO a request for reexamination of the ‘921
patent seeking reexamination of certain claims of the ‘921 patent. On June 10, 2005,
Applied Materials asserted against the Company additional claims of the ‘921 patent
that were not specifically addressed in the Company’s request for reexamination. On
August 22, 2005, the Company filed with the PTO a second request for reexamination
addressing the additional asserted claims. On August 25, 2005, the PTO granted the Company’s
first request for reexamination, finding a “substantial new question of patentability” regarding
seven of the asserted claims in the ‘921 patent. On Sept. 2, 2005, the Court stayed
the California litigation on the ‘921 patent pending the PTO’s decision on the
Company’s second request for reexamination, which addresses the four asserted claims
that were not specifically addressed by the Company’s first request. 






- 8 -







	 	
Following
the Court’s stay of litigation on the ‘921 patent, Applied Materials asserted
two additional patents against the Company, U.S. Patent Nos. 6,256,093 and 6,924,891. In
December 2005, Applied Materials withdrew its claims on the ‘093 patent, which have
been dismissed with prejudice. Also in December 2005, Applied Materials filed a motion
for a preliminary injunction on the ‘891 patent. The parties have reached a
negotiated resolution to that motion that resolved Applied Material’s infringement
claims on the ‘891 patent going forward.  






	 Section 2.8: 	 
Subsections (a), (b) and (c)  






	 	
On
January 2, 2000 TICI Software Products Ltd. (“TICI”) and the Company
entered into a Non-Disclosure and Non-Use Agreement (the “TICI NDA”).
Under the Cooperation Agreement the Company entered into with TICI on February 15, 2000
(the “TICI Cooperation  Agreement”), it was agreed that TICI would
not be precluded from working for and with any other entity in the semi conductor
industry, so long as the TICI NDA is not breached. 






	 	
Under
the TICI Cooperation Agreement the Company was granted a perpetual, worldwide,
nonexclusive free license to use for any purpose and in any way the TICI Legacy Code,
which shall remain the sole property of TICI. 






	 	
The
Company has received and may in the future receive participations through the OCS.
According to the provisions of the Law for the Encouragement of Industrial Research and
Development, 5744-1984 and of Regulations promulgated thereunder (the “Research
 Law”) and their applicability to the Company, the following shall apply: 






	 	
(a)
           Upon sales the Company is obligated to pay royalties to the State of Israel;  






	 	
(b)
           The manufacture of any product developed as a result of any project so funded
          shall take place in the State of Israel unless the Research Committee of the
OCS           pursuant to the Research Law otherwise determines, subject to and pursuant
to           the Research Law; and  






	 	
(c)
                     The know-how derived from any project so funded may not be
transferred to third                     parties without the approval of the Research
Committee of the OCS subject to and                     pursuant to the Research Law.  






	 	
The
Intellectual Property required by the Company to conduct its business includes readily and
commercially available off-the-shelf software. This software is owned by third parties,
and would require the payment of fees or royalties. Please see Section 2.7 for patent
litigation. 






- 9 -







	 	
Please
see Section 2.18 with respect to Liens over the Company’s IP.  





 [***] 




	 	 
Subsection
(b)  





 [***] 



 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 




- 10 -









	 	 
Subsection
(e)  






	 	
6
employees of the Company, who terminated their employment with Applied Materials
(“AMAT”) and begun working for the Company, informed the Company that
they did not receive severance payments from AMAT since AMAT claimed that they breached
their non-competition undertaking. Neither the Company nor, to the Company’s best
knowledge, any of such employees have received any written claim or demand from AMAT. The
Company deposited in the managers insurance plan of 3 of such employees the amount of
severance payments to which they were entitled in connection with the termination of their
employment with AMAT and undertook to deposit the severance payments to which the other 3
employees were entitled to, if such amount will not be paid to them by AMAT. With respect
to only one of such employees, the Company undertook to provide her with legal
representation, if AMAT should bring a legal action against her and further undertook to
pay up to 3 months salary to such employee if she will be legally prohibited to work for
the Company. 






	 	 
Subsection
(f)  






	 	
Gili
Tamir, a management consultant to the Company, signed a confidentiality undertaking but
did not sign a non-competition and assignment of invention undertaking. 






	 Section 2.9: 	
The Company does not have a business license (“Rishayon Esek”). The
Company believes that the lack of such license does not have a Material Adverse Effect on
its business.  






	 	
See
Section 2.5 for OCS and Investment Center approvals.  






	 Section 2.10: 	 
Subsection (a)  






	 	
Please
see Sections 2.2 and 2.3 for certain agreements listed therein.  






	 	 
Subsection
(b), (c) and (d)  






	 	 
General:  






	   	 (1) 	 Please
see reference to Sections 2.2 and 2.3 for certain agreements listed
               therein.  






- 11 -







	   	 (2) 	 The
Company signed numerous Non-Disclosure Agreements.  






	   	 (3) 	 The
Company signed undertakings and related documents with the OCS and the
               Investment Center.  






	   	 (4) 	 The
Company entered into Recruitment Service Agreements with several companies.  






	   	 (5) 	 The
Company entered into agreements and undertakings with Bank Leumi, which are
               detailed below in Section 2.18.  






	   	 (6) 	 The
Company entered into various agreements with Citibank in connection with the
               opening of a global account with Citibank.  






	   	 (7) 	 The
Company was party to several SPAs in connection with the issuance of the
               outstanding Preferred Shares of the Company.  






	   	 (8) 	 The
Company will sign an understating for the benefit of Wellington Partners
               Ventures III Technology Fund L.P. for the grant of certain audit rights.  






	   	 (9) 	 The
Company signed a Finder’s Fee Agreement with Ntra Economic Advisors
               Ltd. and undertook to pay finder’s fee to Portalium Ltd., as set
forth in                Schedule 8.3 to the SPA.  






	 	
Material
Agreements: please refer to the list of Material Agreements below.  






	 	
 Pending
Purchase Orders:   






 [***] 


 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 





- 12 -














	 	
Please
see reference to Section 2.7 for patent litigation.  






	 Section 2.11: 	
Please see reference to Sections 2.2, 2.3 and the Material Agreements numbered 1, 2, 3,
18, 23, 28, 31 and 38 in the list of Material Agreements in Section 2.10 for
related-party transactions/Agreements.  






	 	
Star
has appointed Ms. Yaffa Krindel, Pitango has appointed Mr. Aaron Mankovsky, Orbotech has
appointed Mr. Raanan Cohen, Genesis has appointed Mr. Eddy Shalev and Poalim has appointed
Mr. Eran Gersht as directors of the Company. Rafi Yizhar was appointed as an industry
expert director. Arnon Gat, the Company’s CEO, is a director of the Company. Dr. Gadi
Neumann is a director of the Company. The Company have not undertaken any independent
investigation to determine the existence or absence of any interests of such directors or
their familiy memebers. 






	 Section 2.12:  	
The Company does not have a business license (“Rishayon Esek”). The
Company believes that the lack of such license does not have a Material Adverse Effect on
its business.  






- 13 -







	 	
See
reference to Section 2.5 with regards to the OCS and Investment Center approvals.  






	 Section 2.14: 	
See reference to the Material Agreements numbered 4, 5, 12, 14, 18, 24, 28, 31, 39 and 41
in Section 2.10 (Material Agreements).  






	 Section 2.17: 	
Pursuant to the terms of the Plenus Warrants, the shares issuable upon exercise of the
Plenus Warrants confer upon the holders thereof certain registration rights.  






	 Section 2.18: 	
The Company’s respective property and assets may be subject to liens for current
taxes and assessments not yet due (and which the Company is not aware of), minor
imperfections of title and encumbrances and minor liens that may exist by operation of
law; and liens, loans and encumbrances shown in the Company’s Audited Financial
Statements.  






	 	
The
Company is under a general restriction of the OCS – Please see reference to Section
2.8 and the Research Law for more details. 






	 	
Bank
Leumi  






	 	
The
Company received on May 24, 2004, a loan in the amount of US$ 2.5 million from Bank Leumi
for the purchase of a certain electronic microscope (SEMIVISION). To secure this loan (and
any interest thereon) the Company created in favor of Bank Leumi: (a) a fixed charge over
a deposit in an amount of US$1,000,000 (pursuant to the Bank’s consent dated November
6, 2005, if an amount of not less than $6 million is invested in the Company not later
than March 31, 2006, then such deposit may be reduced to an amount equal to 50% of the
outstanding balance of such loan and moreover, in the event that following such
investment, the outstanding balance of the loan is less than $500,000 the company shall
not be prevented by virtue of such fixed charge, from withdrawing all or part of the
deposit as long as cash amount of at least $200,000 is deposited in the Bank; and (b) a
general first degree floating charge over the Company’s assets. The U.S. Subsidiary
has provided Bank Leumi with a guarantee with respect to the Company’s indebtedness
to Bank Leumi and has signed a Security Agreement over the microscope in favor of Bank
Leumi. In addition, the Company has signed a negative pledge in favor of Bank Leumi. In
connection with the Plenus loan (see below) the Company also created in favor of Bank
Leumi a floating charge and a fixed charge over the Company’s intellectual property,
pari passu with Plenus (see letters of undertaking to Bank Leumi dated January 13, 2005
and November 6, 2005). 






	 	 
Plenus
Technologies Ltd.  






	 	
The
Company received a loan in the amount of US$ 10 million from Plenus ($4.5 million of which
were used to repay a previous loan granted to the Company by Plenus). To secure this loan
(and any interest thereon) the Company created: (a) a general first-degree floating charge
over the Company’s assets in favor of Plenus, Bank Leumi, Golden Gate Bridge Fund L.P
(“Golden Gate”), Plenus II L.P, and Plenus II (D.S.M) L.P., pari passu with Bank
Leumi’s floating charge and subject to Bank Leumi’s pledges over the deposit;
(b) a fixed charge over the Company’s intellectual property in favor of Plenus, Bank
Leumi, Golden Gate, Plenus II L.P, and Plenus II (D.S.M) L.P., pari passu with Bank
Leumi’s fixed charge over the Company’s intellectual property, all subject to
the terms of the Loan Agreement between the Company and Plenus dated October 11, 2005 and
consummated November 6, 2005. 






- 14 -







	 Section 2.19:  	
The external auditors of the Company, Kesselman and Kesselman, a member of
Pricewaterhouse Coopers International Limited, informed the Company that he audit of the
2005 financial statements is substantially complete. The draft Financial statements
attached as Schedule 2.19 represents the final draft and the Company’s auditors do
not expect any major changes to such draft. One outstanding item that may affect the
disclosures in the financial statements is the Closing of the Series BB-3 SPA. Assuming
that such Closing occurs prior to the execution of the financial statements, the notes
will be adjusted to disclose such transaction (in both subsequent event note and in note
1 to the financial statements).  






 Section 2.21: 



	 	
See
amendments to employment agreements with officers, set forth in reference to Section 2.3
above. 






	 	
See
list of open orders in reference to Section 2.10.  






	 	
See
list of Material Agreement below for agreement executed following December 31, 2005  






	 	
On
February 23, 2006 the Board approved a Management Bonus Plan for 2006.  






	 	
On
February 08, 2006 the Company granted its employee, Oren Kashi, a loan in the amount of
NIS 20,000. 






	 	
[Note:
may be updated prior to execution] 






	 Section 2.24: 	
           (a) Certain of the Company's employment compensation  arrangements are fixed
and do not                          differentiate between compensation for regular hours
and overtime work. 






	 	
(b)
                     All grantees under the US Plan have provided Wilson, Sonsini,
Goodrich &                    Rosati with a proxy for the exercise of all rights
granted to them with respect                     to their shares and options, including
voting rights, until the consummation of                     an IPO.  






	 	
See
obligations towards former employees of AMAT referred to in Section 2.8.  






- 15 -







	 	
On
February 23, 2006 the Board approved a Management Bonus Plan for 2006.  






	 	
The
Company agreed with two of its former employees, Jeremy Topaz and Shmuel Roth, that they
will be able to exercise the options granted to them under the Company’s Share
Option Plan (5,000 options each) following termination of their employment. No specific
time limit was agreed with respect to such right to exercise.  






	 Section 2.26: 	
           See Schedule 8.3. 







- 16 -







 Material Agreements: 





	 Number 	 The Company
 or its

Subsidiary 	 Name of the
 other party 	 Title of 
Agreement 	 Effective Date 	 Comments 
	 1. 	 Company 	 Rami Sher, employee 	 Loan Agreement 	 July 31, 2005 	 Loan amount of NIS 20,000. 
	 2. 	 Company 	 Oren Kashi, employee 	 Loan Agreement 	 February 08, 2006 	 Loan amount of NIS 20,000 
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 6. 	 Company 	 NTRA Economic Advisors Ltd. 	 Finder Fee Agreement 	 November 2005 (as amended March 13, 2006) 	   
	 7. 	 Company 	 Applied Materials, Inc. 	 Full Service Contract 	 May 31, 2005 	 Shall be paid US$100,000 in monthly payments of US$8,333 each for maintenance services in respect to W206 machine 
	 8. 	 Company 	 Plenus Technologies Ltd. 	 Loan Agreement 	 October 11, 2005 	 Loan in the amount of $10 million, $4.5 of which were used to return a previous loan 





 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 




- 17 -









	 9. 	 Company 	 Bear, Stearns & Co. Inc. 	   	 December 2004 (amended on November 21, 2005) 	 Assistance in distribution of a private placement memorandum in connection with the Company's contemplated placement of its Preferred Shares 
	 10. 	 Company 	 Phoenix contacts 	 Statement of work 	 March 9, 2006 	 Spatial Filter Module Printer 
	 11. 	 Company 	 Fraunhofer Gesellschaft 	 Purchase Order 	 December 9, 2004 	 Purchased wafer inspection system. Acceptance June 29, 2005 
	 12. 	 Company 	 Hermes-Epitek Corp. 	 Sales Representative Agreement 	 December 1, 2004 	   
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 16. 	 Company 	 Morrison & Foerster L.L.P 	   	 October 20, 2004. 	 IP litigation legal counsels; US corporate counsel 
	 17. 	 Company 	 Shai Silberstein 	 Consulting Agreement 	 October 11, 2004 	   
	 18. 	 Company 	 Taiwan Branch 	 Services Agreement 	 September 1, 2004 	   





 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 




- 18 -









	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   
	 22. 	 Company 	 Silvan Schagen 	 Consulting Agreement 	 June 15, 2004 	   
	 [***] 	   	   	   	   	   
	 24. 	 Company 	 JNC Co. Ltd. 	 Cooperation Agreement 	 July 1, 2003 	   
	 [***] 	   	   	   	   	   
	 [***] 	   	   	   	   	   





 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 




- 19 -








	 [***] 	   	   	   	   	   
	 28. 	 Company 	 Negevtech Inc. 	 Inter Company Loan Agreement 	 January 1, 2003 	   
	 29. 	 Company 	 Eldan Car Rent (1965) Ltd. 	 Car Lease Agreement 	 April 17, 2000 	   
	 30. 	 Company 	 Dorban Investments Ltd. 	 Lease Agreement 	 February 22, 2000 (as extended) 	 Regarding the Company's offices at 12 Hamada Street, Rehovot.

 The Company has provided the lessor a bank guarantee in the amount of NIS 526,620 dated November 20, 2000, which was extended on May 29, 2005 (the amount of the extended guarantee is NIS 565,304.56 linked to the consumer price index). 
	 31. 	 Company 	 TICI Software Products Ltd. 	 Cooperation Agreement 	 February 15, 2000 	   
	 [***] 	   	   	   	   	   





 *** Text omitted and filed separately
with the Securities and Exchange Commission pursuant to 17 CFR § 230.406 and §
200.80(b)(4). 




- 20 -






	 33. 	 Company 	 Hoffman, Wasson & Gitler, PC 	 Power of Attorney 	   	 Appointed to represent the Company in the US Patent and Trademark Office in connection with the Company's Patent applications and any continuation thereof 
	 34. 	 Company 	 Kesselman Corporate Finance Ltd. / Kesselman and Kesselman, CPA 	 Power of Attorney 	   	 Appointed to transact all business with respect to the application to the Investment Center for an approved enterprise status 
	 35. 	 US Subsidiary 	 Devane Realty LLC 	 Lease Agreement 	 June 20, 2005 	 Offices in Alvin Devane, Austin, Texas. The US Subsidiary provided the landlord a security deposit in the amount of US$ 1,318.18. 
	 36. 	 German Subsidiary 	 TechnologieZentrum Dresden 	 Lease Agreement 	 August 18, 2005 	 Offices in Dresden, Germany 
	 37. 	 US Subsidiary 	 T.M Norris Company LLC 	 Lease Agreement 	 March 2006 	 Offices in Southwind Center, Boise 
	 38. 	 US Subsidiary 	 Adam Rhoads 	 Consulting Agreement 	 June 17, 2005 	   
	 39. 	 US Subsidiary 	 VLSI Research Inc. 	 Subscription Agreement 	 April 25, 2005 	   
	 40. 	 US Subsidiary 	 Bet-Israel 101 Ltd. 	 Engagement Agreement 	 April 19, 2005 	 Relocation. 
	 41. 	 US Subsidiary 	 Palmborg Associates, Inc. 	 Representation Agreement 	 June 14, 2004 	   
	 42. 	 US Subsidiary 	 Lakeside Drive Inc. 	 Lease Agreement 	 May 1, 2002 	 Offices in Lakeside Drive, Santa Clara, California. The US Subsidiary provided the landlord a letter of credit in the amount of US$ 50,000. 






- 21 -








Exhibit A  


THE COMPANIES LAW



A COMPANY LIMITED BY
SHARES 



AMENDED AND RESTATED ARTICLES
OF ASSOCIATION OF 



NEGEVTECH LTD. 



PRELIMINARY 



	1.  	Reserved. 






	2.  	In
these Articles, unless the context otherwise requires: 






	 	
These
“Articles” – shall mean the Articles of Association of the Company
as shall be in force from time to time. 






	 	
“as
converted basis” – shall mean assuming the theoretical conversion of all
outstanding Preferred Shares and Ordinary-Preferred Shares into Ordinary Shares, at the
then applicable conversion ratio. 






	 	
“Board” or
“Board of Directors”– shall mean the Board of Directors of
the Company.  






	 	
“Business
Day” – shall mean a day on which commercial banks in Israel are open for
business (including, for the avoidance of doubt, Fridays). 






	 	
The
“Company” – shall mean NEGEVTECH LTD.  






	 	
The
“Companies Law” – shall mean the Companies Law, 5759-1999 as shall
be in effect from time to time and any other law that shall be in effect from time to
time with respect to companies and that shall apply to the Company.  






	 	
The
“Founders” – shall mean Dr. Gad Neumann and Mr. David Alumot.  






	 	
"Genesis"
– shall mean Genesis Partners II, L.D.C., Genesis Partners II (Israel) L.P. and
their Permitted Transferees to which they transfer shares.  






	 	
"Intel"
shall mean Intel Atlantic, Inc., a corporation established and existing under the
laws of the State of Delaware, USA.  






	 	
The
“Office” – shall mean the registered office of the Company as it
shall be from time to time.  






	 	
The
term “Major Holder” shall mean a holder of at least 2.5% of the issued
and outstanding shares of the Company, on an as converted basis and with respect solely to
Article 14 – a holder of at least 2% of the issued and outstanding shares of the
Company, on an as converted basis. 
















	 	
“Majority
Preferred Shareholders” – shall mean the holders of the majority of the
issued and outstanding Preferred Shares (calculated on an as converted basis). 






	 	
“Ordinary
Shares” – shall mean Ordinary Shares of the Company, par value NIS 0.01
each.  






	 	
“Ordinary-Preferred
Shares” – shall mean Ordinary-Preferred Shares of the Company, par value NIS
0.01 each. 






	 	
“Original
Issue Price” – shall mean: (i) with respect to the Series AA Preferred
Shares, $2.81 per share, provided, that with respect to any Series AA Preferred Share
issued following the closing of the Poalim Agreement, the Original Issue Price shall be
the price per share actually paid to the Company for such Series AA Preferred Share; (ii)
with respect to the Series BB-1 Preferred Shares and the Series BB-3 Preferred Shares,
$2.3194 per share; and (iii) with respect to the Series BB-2 Preferred Shares, $1.97149
per share, as such prices may be adjusted, for certain purposes set forth in these
Articles, upon the occurrence of a Recapitalization Event. 






	 	
“Orbotech”
– shall mean Orbotech Technology Ventures L.P. and its Permitted Transferees to which
it transfers shares. 






	 	
“Permitted
Transferee” – shall mean: (i) a person or entity that controls or is
controlled by or is under common control with the respective shareholder; (ii) spouse,
brothers, sisters, parents and children of the transferor or a trust for the benefit of
the transferor and/or any of the foregoing, in the event the shares are held by
individuals; (iii) in the case of any shareholder which is a limited or general
partnership or a trust, to its partners (including retired partners) or beneficiaries and
to affiliated partnerships managed by the same management company or managing (general)
partner or by an entity which directly or indirectly controls, is controlled by, or is
under common control with, such management company or managing or general partner; (iv) a
trustee of the Company’s incentive plans may transfer to a beneficiary and vice
versa; (v) in the case of Plenus Technologies Ltd., Plenus II, L.P., Plenus II (D.C.M.),
Limited Partnership, Golden Gate Bridge Fund, L.P., Bank Leumi Le-Israel B.M. and the
Participants (listed in Schedule 1 of the Loan Agreement between the Company, Plenus II,
L.P. and Plenus II (D.C.M.), Limited Partnership dated October 11, 2005), each shall be
considered a Permitted Transferee of each other, as long as such Permitted Transferee is
not a competitor of the Company. 






	 	
The
term “control” shall have the same meaning as designated to it under the
Companies Law and shall also mean the possession, directly or indirectly, of more than 50%
of the voting power or the right to appoint more than 50% of the members of the Board of
Directors or the right to receive more than 50% of the distributed profit. 






	 	
“Pitango”
– shall mean Pitango Venture Capital Fund III (Israeli Sub) L.P., Pitango Venture
Capital Fund III (Israeli Sub.) Non-Q L.P., Pitango Venture Capital Fund III (Israeli
Investors) L.P., Pitango JP Morgan Fund III (Israel), L.P., Pitango Principles Fund III
(Israel) L.P., Pitango Venture Capital Fund III Trusts 2000 L.P. and their Permitted
Transferees to which they transfer shares 






	 	
The
“Poalim Agreement” shall mean the Series BB Preferred Share Purchase
Agreement dated September 13, 2005 between the Company and certain investors. 






- 2 -







	 	
“Poalim
Ventures” means Poalim Ventures Ltd., Poalim Ventures I Ltd. and Poalim Ventures
II L.P., who shall be deemed Permitted Transferees of each other, and their Permitted
Transferees to which they transfer shares. 






	 	
“Preferred
Shares” – shall mean Series AA Preferred Shares and Series BB Preferred
Shares.  






	 	
“Qualified
IPO” or “QIPO” – shall mean the consummation of a firm
commitment underwritten public offering of the Company’s shares, netting to the
Company at least US$ 30,000,000 (Thirty Million), at an offering price per share in excess
of 3 (three) times the Original Issue Price of the Series BB-1 Preferred Shares. 






	 	
“Recapitalization
Event” – shall mean any event of share combination or subdivision,
distribution of bonus shares or any other similar reclassification, reorganization or
recapitalization of the Company’s share where the shareholders retain their
proportionate holdings in the Company. 






	 	
The
“Share Transfer Agreement” – shall mean that certain Share Transfer
Agreement effective as of the closing of the Poalim Agreement between the Company, the
Founders and certain Purchasers (as defined therein). 






	 	
“Series
AA Preferred Shares” – shall mean Series AA Preferred Shares of the Company,
par value NIS 0.01 each. 






	 	
“Series
BB Preferred Shares” – shall mean Series BB-1 Preferred Shares, Series
BB-2 Preferred Shares and Series BB-3 Preferred Shares. 






	 	
“Series
BB-1 Preferred Shares” – shall mean Series BB-1 Preferred Shares of the
Company, par value NIS 0.01 each. 






	 	
“Series
BB-2 Preferred Shares” – shall mean Series BB-2 Preferred Shares of the
Company, par value NIS 0.01 each. 






	 	
“Series
BB-3 Preferred Shares” – shall mean Series BB-3 Preferred Shares of the
Company, par value NIS 0.01 each. 






	 	
“Star”
– shall mean SVE Star Ventures Enterprises Gmbh & Co. No. IX KG., Star Management
of Investments No. II (2000) L.P., SVM Star Ventures Managementgesellschaft mbH No. 3,
Star Growth Enterprise, a German Civil Law Partnership (with limitation of liability) and
their Permitted Transferees to which they transfer shares. 






	 	
The
“Star Agreement” – shall mean the Preferred Share Purchase Agreement
dated May 2002 between the Company and certain investors. 






	 	
“Transition
Agreement” shall mean the Agreement dated as of December 26, 2004 between the
Company and the Founders, as amended. 






	 	
“Wellington”
– shall mean Wellington Partners Ventures III Technology Fund L.P. and its Permitted
Transferees to which it transfers shares. 






- 3 -







	 	
The
“Wellington Agreement” – shall mean the Series BB Preferred Share
Purchase Agreement dated March 22, 2006. 






	 	
In
these Articles, subject to this Article 2 and unless the context otherwise requires,
expressions defined in the Companies Law, or any modification thereof in force at the date
at which these Articles become binding on the Company, shall have the meanings so defined;
and words importing the singular shall include the plural, and vice versa, and words
importing the masculine gender shall include the female, and words importing persons shall
include bodies corporate. The titles of the articles are not part of the articles. 






	 	
For
purposes of determining the availability of any right or the applicability of any
limitation under these Articles, all Ordinary Shares and Preferred Shares entitled to such
right or the application of such limitation held or acquired by affiliated entities or
persons constituting Permitted Transferees of each other, shall be aggregated and such
entities or persons shall be viewed as a single Shareholder. 






	 	
In
the event that an article that has been added to these Articles contradicts an original
article found in these Articles – the article added shall take precedence. 






	3.  	PRIVATE
COMPANY 






	 	(a) 	The
Company is a private Company. 






	 	(b) 	The
right to transfer the shares of the Company shall be restricted in the           manner
hereinafter appearing; 






	 	(c) 	The
number of the shareholders of the Company (not including persons who are in           the
employment of the Company, and persons who, having been formerly in the
          employment of the Company were while in that employment and have continued
after           the termination of that employment to be shareholders of the Company)
shall be           limited to fifty, provided that, for the purposes of this provision,
where two           or more persons hold one or more shares in the Company jointly they
shall be           treated as a single shareholder; and 






	 	(d) 	No
invitation shall be issued to the public to subscribe for any shares or
          debentures or debenture stocks of the Company. 






	3A  	CHARITABLE
CONTRIBUTIONS






	 	
The
Company may donate reasonable sums of money and/or issue securities of the Company
representing up to tenth of one percent (0.1%) of its issued and outstanding share
capital, to any worthy purpose or entity approved by the Board of Directors of the Company
even if such donation is not made for business consideration. 






	4.  	OFFICE 






	 	
The
Office of the Company shall be at such place as the Board shall from time to time
designate. 







- 4 -







	5.  	THE
CAPITAL 






	 	
The
authorized capital of the Company is comprised of NIS 855,700 divided into: 47,000,996
Ordinary Shares, par value 0.01 NIS per share, 1,569,004 Ordinary-Preferred Shares, par
value 0.01 NIS per share, 15,000,000 Series AA Preferred Shares, par value 0.01 NIS per
share, 12,137,708 Series BB-1 Preferred Shares, par value 0.01 NIS per share, 4,000,000
Series BB-2 Preferred Shares, par value 0.01 NIS per share and 5,862,292 Series BB-3
Preferred Shares, par value 0.01 NIS per share. 






	6.  	RIGHTS,
PREFERENCES AND RESTRICTIONS OF PREFERRED SHARES AND ORDINARY-PREFERRED           SHARES 






	 	
The
rights, preferences, privileges, and restrictions granted to and imposed on the Preferred
Shares and on the Ordinary-Preferred Shares, are as set forth in these Articles. 






	 	
The
Ordinary-Preferred Shares shall have the same rights, preferences, privileges and
restrictions granted to and imposed on the Ordinary Shares, except for the rights,
preferences and privileges specifically granted to the Ordinary-Preferred Shares in these
Articles. 






	7.  	DIVIDEND
PROVISIONS 






	 	
Subject
to Article 8 below, any dividends declared by the Company shall be distributed, subject to
Article 30 below, between all holders of shares of the Company, pari passu, based upon the
number of Ordinary Shares (on an as converted basis) held by any such holder. 






	8.  	DIVIDEND
AND LIQUIDATION PREFERENCE 






	 	(a) 	Upon
the happening of any of the following events: 






	 	(1) 	any
liquidation, dissolution or winding up of the Company, either voluntary or
               involuntary; or  






	 	(2) 	any
consolidation, or merger of the Company with or into another corporation
               following which the shareholders of the Company prior to such transaction
do not                hold following such transaction more than 50% of the outstanding
shares and the                voting power of the surviving corporation by virtue of
their holdings in the                Company prior to such transaction (“Merger”);
or  






	 	(3) 	any
sale or transfer to another corporation of all or substantially all of the
               assets of the Company, or all or substantially all of the shares in the
Company                (other than to a wholly owned subsidiary of the Company or to a
corporation in                which the shareholders of the Company prior to the
transaction hold more than                50% of the outstanding voting rights) (“Acquisition”);
or  






	 	(4) 	any
distribution of dividends;  






	 	
(any
of the events described in sections (1) to (4) above shall be hereinafter referred to as
a “Liquidation Event”) 






- 5 -







	 	
then
the amount of declared dividends or any assets of the Company available for distribution
in connection with, or the consideration received in, such Liquidation Event (hereinafter
referred to as “Distribution Assets”) shall be distributed pursuant to
the following order of preference: 






	 	(b) 	The
holders of the Series BB-3 Preferred Shares shall be entitled to receive,           prior
and in preference to any distribution of any of the assets of the Company           to
the holders of all other equity securities of the Company by reason of their
          ownership thereof, an amount per Series BB-3 Preferred Share equal to: (i) the
          applicable Original Issue Price for each Series BB-3 Preferred Share, plus (ii)
          an amount equal to declared but unpaid dividends on each such Series BB-3
          Preferred Share, plus (iii) an amount equal to 8% return per annum, compounded
          annually, on the applicable Original Issue Price, for each BB-3 Preferred Share
          to be calculated from the date of payment to the Company on account of such
          Series BB-3 Preferred Share until such distribution, less (iv) any amount of
          dividend preference paid on account of such Series BB-3 Preferred Share until
          such distribution (the “BB-3 Preference Amount”). In the event
          that the Distribution Assets are not sufficient for distribution to the holders
          of the Series BB-3 Preferred Shares pursuant to this subarticle (b), such
          Distribution Assets as are available for distribution, shall be distributed
          among the holders of the Series BB-3 Preferred Shares pro-rata in proportion to
          the preferential amount each such holder is otherwise entitled to receive. 






	 	(c) 	Following
the payment in full of the BB-3 Preference Amount, the holders of the           Series
BB-1 Preferred Shares and the holders of the Series BB-2 Preferred Shares           shall
be entitled to receive, prior and in preference to any distribution of any           of
the assets of the Company to the holders of all other equity securities of           the
Company by reason of their ownership thereof, an amount per each Series BB-1
          Preferred Share and per each Series BB-2 Preferred Share equal to: (i) the
          applicable Original Issue Price for each such share, plus (ii) an amount
          equal to declared but unpaid dividends on each such share, plus (iii) an amount
          equal to 8% return per annum, compounded annually, on the applicable Original
          Issue Price, for each such share to be calculated from the date of payment to
          the Company on account of such share until such distribution, less (iv) any
          amount of dividend preference paid on account of such share until such
          distribution (the “BB Preference Amount”). In the event
          that the Distribution Assets are not sufficient for distribution to the holders
          of the Series BB-1 Preferred Shares and the holders of the Series BB-2
Preferred           Shares pursuant to this subarticle (c), such Distribution Assets as
are           available for distribution, shall be distributed among the holders of the
Series           BB-1 Preferred Shares and the holders of the Series BB-2 Preferred
Shares           pro-rata in proportion to the preferential amount each such holder is
otherwise           entitled to receive. 






- 6 -







	 	(d) 	Following
the payment in full of the BB-3 Preference Amount and the BB           Preference Amount,
the holders of the Series AA Preferred Shares and the holders           of
Ordinary-Preferred Shares shall be entitled to receive prior and in           preference
to any distribution of any of the assets of the Company to the           holders of all
other equity securities of the Company by reason of their           ownership thereof, an
aggregate amount equal to the sum of: (i) the Original           Issue Price for each
Series AA Preferred Share, plus (ii) an amount equal to           declared but unpaid
dividends on each such Series AA Preferred Share, plus (iii)           an amount equal to
8% return per annum, compounded annually, on the Original           Issue Price for each
outstanding Series AA Preferred Share to be calculated from           the later of the
date of payment to the Company on account of such Series AA           Preferred Share or
May 23, 2002 and until such distribution, less (iv) any           amount of dividend
preference paid on account of such Series AA Preferred Share           and each
Ordinary-Preferred Share until such distribution (the           “Secondary
Preference Amount”), such aggregate amount to be           distributed among the
holders of Series AA Preferred Shares and the holders of           Ordinary-Preferred
Shares such that: (x) holders of Series AA Preferred Shares           shall receive out
of the Secondary Preference Amount an amount equal to the           Secondary Preference
Amount multiplied by a fraction (the           “Multiplier”) the
numerator of which is the total number of the           then outstanding Series AA
Preferred Shares (for the avoidance of doubt, not on an as converted basis) and
the denominator of which is such total           number of then outstanding Series AA
Preferred Shares plus 1.2764 times the           total number of the then outstanding
Ordinary-Preferred Shares (for the           avoidance of doubt, not on an as
converted basis) (“AA Secondary           Preference Amount”), to be
allocated among the holders of Series AA           Preferred Shares pro rata, such that
for each Series AA Preferred Share held by           a holder of Series AA Preferred
Shares such holder shall be entitled to an           amount  equal to the product of
the Multiplier multiplied by the sum of:           (i) the Original Issue Price for such
Series AA Preferred Share, plus (ii) an           amount equal to declared but unpaid
dividends on such Series AA Preferred Share,           plus (iii) an amount equal to 8%
return per annum, compounded annually, on the           Original Issue Price for such
Series AA Preferred Share to be calculated from           the later of the date of
payment to the Company on account of such Series AA           Preferred Share or May 23,
2002 and until such distribution, less (iv) any           amount of dividend preference
paid on account of such Series AA Preferred Share           until such distribution, and
(y) the holders of Ordinary Preferred Shares shall           receive out of the Secondary
Preference Amount an amount equal to the Secondary           Preference Amount minus the
AA Secondary Preference Amount, to be allocated           among the holders of Ordinary
Preferred Shares pro-rata based on the number of           Ordinary-Preferred Shares held
by them. 






	 	
In
the event that, following the payment in full of the BB-3 Preference Amount and the BB
Preference Amount, the remaining Distribution Assets are not sufficient for a full
payment of the Secondary Preference Amount pursuant to this subarticle (d), then such
remaining Distribution Assets shall be distributed among the holders of Series AA
Preferred Shares and the holders of Ordinary-Preferred Shares in proportion to the amount
they would have been entitled to receive had the Secondary Preference Amount been paid in
full. 






	 	(e) 	Thereafter,
the holders of the Preferred Shares, the holders of the           Ordinary-Preferred
Shares and the holders of the Ordinary Shares shall be           entitled to receive any
remaining Distribution Assets available for distribution           pro rata based on the
number of Ordinary Shares (on an as converted basis) held           by any such holder. 






	 	(f) 	Notwithstanding
the foregoing, if distribution of the Distribution Assets among           all
shareholders of the Company, pro-rata to the number of shares they hold on           an
as converted basis, will result in the holders of Series BB-3 Preferred           Shares
receiving in respect of each Series BB-3 Preferred Share they hold an           amount of
at least three (3) times the Original Issue Price of the Series BB-3           Preferred
Shares, then the provisions of subarticles (b)-(e) above shall not           apply and
the Distribution Assets shall be distributed among all shareholders of           the
Company, pro-rata to the number of share they hold, on an as converted           basis. 







- 7 -







	 	(g) 	In
the event of a Merger or an Acquisition in which the shareholders (and not           the
Company) are the intended recipients of the proceeds resulting therefrom           (such
as with a sale of shares transaction), no transfer of securities in           accordance
thereto will be considered valid, unless the provisions of the           distribution
preferences under this Article 8 shall apply. 






	 	(h) 	Whenever
the Distribution Assets are in securities or property other than cash,           the
value of such assets shall be the fair market value of such securities or           other
property as shall be determined by the Board, or by the liquidator in case           of
winding up. Such proceeds shall be made payable in US dollars unless any           holder
of fully paid share elects to receive such distributions in NIS. The NIS
          equivalent of the dollar value of any distribution shall be determined in
          accordance with the Representative Rate last published by the Bank of Israel
          prior to the date of the making of the distribution. 






	9.  	CONVERSION
OF PREFERRED SHARES 






	 	
The
holders of the Preferred Shares shall have conversion rights as follows (the
“Conversion Rights”): 






	 	(a) 	Right
to Convert. 






	 	(1) 	Subject
to Article 9(c), each fully paid Preferred Share shall be convertible,                at
the option of the holder thereof, at any time after the date of issuance of
               such Preferred Share at the Office or any transfer agent for the Preferred
               Shares, into one fully paid and non-assessable Ordinary Share nominal
value NIS                0.01 and the Company shall, at such time, issue to the holders
thereof, for no                additional charge (a portion of the premium paid for such
Preferred Shares being                attributed as payment on account of the nominal
value of such additional                Ordinary Shares – in the event that the then
applicable law requires that                shares are issued for no less than their
nominal value and to the extent no                other source available pursuant to the
provisions of the then applicable law may                be used for such purpose), such
number of fully-paid and non-assessable Ordinary                Shares as required so
that the total number of Ordinary Shares so issued (i.e.                including the
Ordinary Share into which the Preferred Share was converted) will                be equal
to the number determined by dividing the Original Issue Price                applicable
to such Preferred Share by the Conversion Price (as defined below) at                the
time in effect for such share. In the event that the then applicable law
               requires that shares are issued for not less than their nominal value, and
the                aggregate nominal value of all such Ordinary Shares shall exceed the
               consideration paid to the Company with respect to such Preferred Share,
the                holder thereof shall pay the Company such excess nominal value to the
extent no                other source available pursuant to the provisions of the then
applicable law                (such as premiums paid for other shares of the Company) may
be used for such                purpose. The initial Conversion Price per share for the
Series BB-3 Preferred                Shares, the Series BB-1 Preferred Shares and the
Series AA Preferred Shares                shall be the Original Issue Price of the Series
BB-1 Preferred Shares and the                initial Conversion Price for the Series BB-2
Preferred Shares shall be the                Original Issue Price of the Series BB-2
Preferred Shares, provided, however,                that the Conversion Price for the
Preferred Shares shall be subject to                adjustment as set forth in
subarticles 9(c), 9(d) and 9(e).  







- 8 -









	 	(2) 	Each
Preferred Share shall automatically be converted into Ordinary Shares at
               the Conversion Price at the time in effect for such Preferred Share upon
the                earlier of: (A) a Qualified IPO, or (B) the written consent of the
Majority                Preferred Shareholders, provided however that if such conversion
is not part of,                or conditioned upon the closing of, a Qualified
Transaction (as defined in                Article (12)(g) below), such conversion shall
be subject to the Special BB                Consent as set forth in Article 12(g) below.
The Series AA Preferred Shares                shall also automatically be converted into
Ordinary Shares as aforesaid upon the                consent of the holders of at least
sixty six percent (66%) of the issued and                then outstanding Series AA
Preferred Shares.  






	 	(b) 	Mechanics
of Conversion. 






	 	(1) 	Before
any holder of Preferred Shares shall be entitled to convert the same into
               Ordinary Shares such holder shall surrender the certificate or
certificates                therefor at the Office and shall give written notice to the
Company of the                election to convert the same (or any part thereof) and
shall state therein the                name or names of any nominee for such holder in
which the certificate or                certificates for shares of Ordinary Shares are to
be issued. The Company shall,                as soon as practicable thereafter unless
such notice states that conversion is                to be effective on any later date or
when any conditions specified in the notice                have been fulfilled in which
case conversion shall take effect on such other                date or when such
conditions have been fulfilled, issue and deliver at such                office to such
holder of Preferred Shares, or subject to the transfer                restrictions
contained in these Articles to the nominee or nominees of such                holder, a
certificate or certificates for the number of shares of Ordinary                Shares to
which such holder shall be entitled as aforesaid. Such conversion                shall be
deemed to have been made immediately prior to the close of business on                the
date of such surrender of the shares of Preferred Shares to be converted, or
               on any later date or when any conditions specified in the notice have been
               fulfilled and the person or persons entitled to receive the Ordinary
Shares                issuable upon such conversion shall be treated for all purposes as
the record                holder or holders of such Ordinary Shares as of such date. If
the conversion is                in connection with a QIPO, the conversion may, at the
option of any holder                tendering Preferred Shares for conversion, be
conditioned upon the closing with                the underwriter of the sale of
securities pursuant to such offering, in which                event the person(s)
entitled to receive the Ordinary Shares issuable upon such                conversion of
the Preferred Shares shall not be deemed to have converted such                Preferred
Shares until immediately prior to the closing of such sale of                securities.
In the event that the certificate(s) representing the Preferred                Shares to
be converted as aforesaid are not delivered to the Company, then the
               Company shall not be obligated to issue any certificate(s) representing
the                Ordinary Shares issued upon such conversion, unless the holder of such
Preferred                Shares notifies the Company in writing that such certificate(s)
have been lost,                stolen or destroyed and executes an agreement satisfactory
to the Company to                indemnify the Company from any loss incurred by it in
connection with such                certificates.  






- 9 -







	 	(2) 	A
conversion of Preferred Shares pursuant to one of the events described in
               Article 9(a)(2) shall be deemed to have taken place automatically
regardless of                whether the certificates representing such shares have been
tendered to the                Company but from and after such conversion any such
certificates not tendered to                the Company shall be deemed to evidence
solely the Ordinary Shares received upon                such conversion and the right to
receive a certificate for such Ordinary Shares.  






	 	(c) 	Conversion
Price Adjustments of Preferred Shares 






	 	
Until
the QIPO, the applicable Conversion Price of the Preferred Shares shall be subject to
adjustment from time to time as follows: 






	 	(1) 	During
the period commencing on the closing of the Poalim Agreement, and ending
               on the earlier of (x) the QIPO or (y) 24 months following such date (the
               “Initial Period”), upon each issuance by the
Company of                any “Additional Securities” (as defined below)
without consideration                or for a price per share less than the applicable
Conversion Price for any                issued and outstanding Series BB Preferred Shares
in effect immediately prior to                the issuance of such Additional Securities,
the applicable Conversion Price for                any such issued and outstanding Series
BB Preferred Share in effect immediately                prior to each such issuance shall
be adjusted to the price per share paid at                such issuance.  






	 	(2) 	With
respect to the Series BB Preferred Shares during the period after the
               Initial Period and until the QIPO and with respect to the Series AA
Preferred                Shares during the Initial Period and thereafter until the QIPO,
upon each                issuance by the Company of any “Additional Securities” (as
defined                below), without consideration or for a price per share less than
the applicable                Conversion Price for any issued and outstanding applicable
series of Preferred                Shares in effect immediately prior to the issuance of
such Additional                Securities, the applicable Conversion Price for any such
issued and outstanding                series of Preferred Shares in effect immediately
prior to each such issuance                shall be adjusted to a price (calculated to
the nearest ten thousandth of a US                Dollar ($0.0001)) determined by
dividing (1) the sum of (A) the total number of                Ordinary Shares issued and
outstanding prior to the issuance of such Additional                Securities multiplied
by the applicable Conversion Price of such series, as the                case may be, in
effect prior to the issuance of such Additional Securities, plus                (B) the
total amount of the consideration received by the Company for such
               Additional Securities by (2) the sum of the total number of Ordinary
Shares                issued and outstanding immediately prior to the issuance of such
Additional                Securities plus the number of such Additional Securities
issued. For the purpose                of the above calculation, the number of shares of
Ordinary Shares issued and                outstanding immediately prior to such issue
shall be calculated on an as                converted and fully diluted basis, as if all
outstanding warrants, options or                other rights for the purchase of shares
or convertible securities had been fully                exercised (and the resulting
securities fully converted into Ordinary Shares, if                so convertible) as of
such date.  








- 10 -







	 	(3) 	In
the event that the full application of the anti dilution protection in
               subarticles 9(c)(1) and 9(c)(2) cannot be implemented mathematically, then
the                Series BB Preferred Shares shall have absolute priority over the
Series AA                Preferred Shares in implementation of the above, such that only
the Series BB                Preferred Shares shall be provided with the anti-dilution
protection.  






	 	(4) 	(A) 	
No adjustments of any applicable Conversion Price shall be made in an amount
               less than ten thousandth of a US Dollar ($0.0001). No adjustment of any
               applicable Conversion Price pursuant to subarticles 9(c)(1) and (2) shall
be                made if it has the effect of increasing the applicable Conversion Price
above                the applicable Conversion Price in effect immediately prior to such
adjustment.  






	 	(B) 	In
the case of the issuance of Additional Securities (as defined below) for           cash,
the consideration, for the purpose of subarticles 9(c)(1) and (2), shall           be
deemed to be the amount of cash received therefore before any payment of
          commissions, expenses and the like.  






	 	(C) 	In
the case of the issuance of Additional Securities (defined below) for a
          consideration, in whole or in part other than cash, the consideration other
than           cash shall, for the purpose of subarticles 9(c)(1) and (2), be deemed to
be the           fair value thereof as determined, in good faith, by the Board of
Directors.  






	 	(D) 	In
the case of the issuance of options to purchase or rights to subscribe for
          Ordinary Shares, or securities by their terms convertible into or exchangeable
          for Ordinary Shares or options to purchase or rights to subscribe for such
          convertible or exchangeable securities, the aggregate maximum number of
Ordinary           Shares deliverable upon exercise (assuming the satisfaction of any
conditions to           exercise, including without limitation, the passing of time, but
without taking           into account potential antidilution adjustments) of such options
to purchase or           rights to subscribe for Ordinary Shares or upon conversion or an
exchange of           such convertible or exchangeable security shall be deemed to have
been issued at           the time of the issuance of such options, rights, or securities
at a           consideration equal to the consideration (determined in the manner
provided in           subarticle 9(c)(4)(B) and (c)(4)(C)), if any, received by the
Company upon the           issuance of such options or rights or securities plus any
additional           consideration payable to the Company pursuant to the term of such
options or           rights or securities (without taking into account potential
antidilution           adjustments) for the Ordinary Shares covered thereby, and the
applicable           Conversion Price shall be adjusted accordingly. Upon the expiration
of any such           options or rights, the termination of any such rights to convert or
exchange or           the expiration of any options or rights related to such convertible
or           exchangeable securities, the Conversion Price for such series of Preferred
          Shares to the extent in any way affected by or computed using such options,
          rights or securities or options or rights related to such securities (unless
          such options or rights were merely to be included in the numerator and
          denominator for purposes of determining the number of Ordinary Shares
          outstanding for purposes of Article 9(c)(2)) shall be recomputed to reflect the
          issuance of only the number Ordinary Shares (and convertible or exchangeable
          securities that remain in effect) actually issued upon the exercise of such
          options or rights, or upon the conversion or exchange of such securities or
upon           the exercise of the options or rights related to such securities. The
number of           Ordinary Shares deemed issued and the consideration deemed paid
therefor shall           be appropriately adjusted to reflect any change, termination or
expiration of           the type described in this Article 9(c)(4)(D).  






- 11 -







	 	(E) 	For
purpose of subarticles 9(c)(1) and (2) hereof, the consideration for any
          Additional Securities shall be taken into account at the U.S. dollar equivalent
          thereof, on the day such Additional Securities are issued or deemed to be
issued           pursuant to subarticle 9(c)(4)(D).  






	 	(5) 	“Additional
Securities” shall mean any Ordinary Shares, options to                purchase or
rights to subscribe for Ordinary Shares, or securities which by                their
terms are convertible into or exchangeable for Ordinary Shares, or any
               securities convertible into or exercisable for any securities of the
foregoing.                Notwithstanding the foregoing, “Additional Securities” does
not                include:  






	 	(A) 	Securities
issued pursuant to a transaction described in subarticle 9(c)(6)                hereof;  






	 	(B) 	The
issuance, pursuant to the approval of the Board, of Ordinary Shares or
               Options to purchase Ordinary Shares to employees, directors and bona-fide
               consultants; and  






	 	(C) 	Securities
issued pursuant to options, warrants or other rights outstanding on                the
losing of the Poalim Agreement or on the closing of the Wellington
               Agreement, provided that such options, warrants or other rights are
reflected in                the Capitalization Table attached as Schedule 2.2 to the
Poalim Agreement or in                Schedule 2.2 to the Wellington Agreement; and  






	 	(D) 	Ordinary
Shares issued upon conversion of Preferred Shares or Ordinary-Preferred
               Shares; and  






	 	(E) 	Issuance
of bonus shares, providing such bonus shares are issued to all the then
               existing shareholders, or shares issued pursuant to a rights offering in
which                all such shares are offered exclusively to existing shareholders;
and  






- 12 -







	 	(F) 	Shares
issued in the acquisition of another company provided that the issuance                of
such shares is approved by the Board of Directors; and  






	 	(G) 	Shares
issued in connection with equipment leases, bank loans or secured debt
               financings approved by the Board of Directors provided the number of such
shares                issued shall not exceed 1% of the then issued and outstanding share
capital of                the Company on a fully diluted, as converted basis; and  






	 	(H) 	Securities
issued or issuable following written approval of Majority Preferred
               Shareholders in which they agree to waive their anti-dilution or
pre-emptive                rights (as the case may be) with respect to such specific
issuance.  






	 	(I) 	Securities
issued as a charitable donation pursuant to Article 3A.  






	 	(6) 	If
the Company shall subdivide or combine its Ordinary Shares, the applicable
               Conversion Price shall be proportionately reduced, in case of subdivision
of                shares, as at the effective date of such subdivision, or if the Company
shall                fix a record date for the purpose of so subdividing, as at such
record date,                whichever is earlier, or shall be proportionately increased,
in the case of                combination of shares, as at the effective date of such
combination, or, if the                Company shall fix a record date for the purpose of
so combining, as at such                record date, whichever is earlier.  






	 	(7) 	Subject
to the liquidation preference of the Preferred Shares as set forth in
               Article 8 above, if the Company at any time shall make a distribution
of                its assets to the holders of its Ordinary Shares as a dividend in
liquidation or                partial liquidation or by way of return of capital or other
than as a dividend                payable out of earnings or surplus legally available
for dividends, each holder                of Preferred Shares shall be entitled to
receive without payment of any                additional consideration, a sum equal to
the amount of such assets as would have                been payable to such holder as
owner of that number of Ordinary Shares                receivable by exercise of the
conversion rights had such holder been the holder                of record of such
Ordinary Shares on the record date for such distribution; and                an
appropriate provision therefor shall be made a part of any such distribution.  






	 	(d) 	Other
Distributions 






	 	
Subject
to the liquidation preference of the Preferred Shares as set forth in Article 8
above, in the event the Company shall declare a distribution payable in securities of
other persons, evidences of indebtedness issued by the Company or other persons, assets
(excluding cash dividends) or options or rights not referred to in subarticle 9(c)(5) or
if the Company at any time shall pay a dividend payable in additional Ordinary Shares or
other securities or rights convertible into, or entitling the holder thereof to receive
directly or indirectly, additional Ordinary Shares then, in each such case for the
purpose of this subarticle 9(d), the holders of the Preferred Shares shall be entitled to
receive such distribution, in respect of their holdings on an as-converted basis as of
the record date for such distribution. 







- 13 -







	 	(e) 	Recapitalizations 






	 	
If
at any time or from time to time there shall be a Recapitalization Event (other than a
subdivision, combination or merger or sale of assets transaction provided for elsewhere
in this Article 9 or Article 8) provisions shall be made so that the holders of
the Preferred Shares shall thereafter be entitled to receive upon conversion of the
Preferred Shares the number of Ordinary Shares or other securities or property of the
Company or otherwise, to which a holder of Ordinary Shares deliverable upon conversion
would have been entitled immediately prior to such Recapitalization Event. In any such
case, appropriate adjustment shall be made in the application of the provisions of this
Article 9 with respect to the rights of the holders of the Preferred Shares after such
Recapitalization Event to the end that the provisions of this Article (including
adjustment of the Conversion Price then in effect and the number of shares issuable upon
conversion of the Preferred Shares) shall be applicable after that event in a manner as
nearly equivalent as may be practicable. 






	 	(f) 	No
Impairment 






	 	
The
Company will not, by amendment of these Articles or through any reorganization,
recapitalization, transfer of assets, consideration, merger, dissolution, issue or sale
of securities or any other voluntary action, avoid or seek to avoid the observance or
performance of the Conversion Rights of the holders of Preferred Shares, but will at all
times in good faith assist in the carrying out of all the provisions of this Article 9
and in the taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Preferred Shares against impairment. 






	 	(g) 	No
Fractional Shares and Certificate as to Adjustments 






	 	(1) 	No
fractional shares shall be issued upon conversion of the Preferred Shares,
               and the number of Ordinary Shares to be issued shall be rounded to the
nearest                whole share. Whether or not fractional shares are issuable upon
such conversion                shall be determined on the basis of the total number of
Preferred Shares held by                the holder and the number of Ordinary Shares
issuable upon such aggregate                conversion.  






	 	(2) 	Upon
the occurrence of each adjustment or readjustment of any applicable
               Conversion Price pursuant to this Article 9, the Company, at its
expense,                shall promptly compute such adjustment or readjustment in
accordance with the                terms hereof and prepare and furnish to each holder of
Preferred Shares a                certificate setting forth each adjustment or
readjustment and showing in detail                the facts upon which such adjustment or
readjustment is based. The Company shall                furnish or cause to be furnished
to such holder a like certificate setting forth                (A) such adjustment
and readjustment, (B) the applicable Conversion                Price at the time in
effect, and (C) the number of Ordinary Shares and the                amount, if any,
of other property which at the time would be received upon the                conversion
of a Preferred Share.  






- 14 -








	 	(h) 	Notices
of Record Date 






	 	
In
the event of any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are entitled to receive
any dividend (including a cash dividend) or other distribution, any right to subscribe
for, purchase or otherwise acquire any shares of any class or any other securities or
property, or to receive any other right, the Company shall provide to each holder of
Preferred Shares, at least 20 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right. 






	 	(i) 	Reservation
of Shares Issuable Upon Conversion 






	 	
The
Company shall at all times reserve and keep available out of its authorized but unissued
shares of Ordinary Shares solely for the purpose of effecting the conversion of the
Preferred Shares such number of its Ordinary Shares as shall from time to time be
sufficient to effect the conversion of all outstanding Preferred Shares; and if at any
time the number of authorized but unissued Ordinary Shares shall not be sufficient to
effect the conversion of all then outstanding Preferred Shares, in addition to such other
remedies as shall be available to the holder of such Preferred Shares, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued Ordinary Shares to such number of shares as shall be
sufficient for such purposes. 






	10.  	CONVERSION
OF ORDINARY-PREFERRED SHARES 






	 	(a) 	Immediately
following the closing of the Poalim Agreement, each           Ordinary-Preferred Share
shall be convertible, at the option of the holder           thereof, into one fully paid
and non-assessable Ordinary Share nominal value NIS           0.01 (the “Converted
Ordinary-Preferred Share”) and           upon such conversion the Company
shall issue to the holders thereof, for no           additional charge (in the event that
the then applicable law requires that           shares are issued for not less than their
nominal value, and the aggregate           nominal value of all such Ordinary Shares
shall exceed the consideration paid to           the Company with respect to such
Ordinary – Preferred Share, the holder           thereof shall pay the Company such
excess nominal value to the extent no other           source available pursuant to the
provisions of the then applicable law (such as           premiums paid for other shares
of the Company) may be used for such purpose)           such number of additional
fully-paid and non-assessable Ordinary Shares as           required so that the total
number of Ordinary Shares so issued (i.e. including           the Ordinary Share into
which the Ordinary – Preferred Share was converted)           will be equal to the
number determined by multiplying the Converted           Ordinary-Preferred Share by
1.552794 (subject, however, to Article 9 (g)(i)           above). Accordingly, the total
number of Ordinary Shares into which the           Ordinary-Preferred Shares may be
converted (immediately following the closing of           the Poalim Agreement and the
sale of the Founders’ shares pursuant to the           Share Transfer Agreement)
shall be 2,436,340. 






- 15 -







	 	(b) 	The
Ordinary-Preferred Shares shall be automatically converted into Ordinary           Shares
as aforesaid in the event of an automatic conversion of the Series AA           Preferred
Shares of the Company pursuant to Article 9(a)(2) above. The           conversion of the
Ordinary-Preferred Shares into Ordinary Shares upon the           automatic conversion of
the Series AA Preferred Shares shall not require the           consent of the holders of
Ordinary-Preferred Shares. The Ordinary-Preferred           Shares shall also
automatically be converted into Ordinary Shares as aforesaid           upon the consent
of the holders of at least sixty six percent (66%) of the           issued and then
outstanding Ordinary-Preferred Shares. 






	 	(c) 	The
applicable provisions of Article 9 (b) shall apply, mutatis mutandis, to
          conversions pursuant to sub-paragraphs (a) – (b) of this Article 10. 






	 	(d) 	The
provisions of subparagraphs (c)(6) and (7), (d) to (i) of Article 9 above           shall
apply with respect to the Ordinary-Preferred Shares, mutatis mutandis. 






	11.  	VOTING
RIGHTS 






	 	
Subject
to Article 58 below, each holder of Ordinary Shares, Ordinary-Preferred Shares and
Preferred Shares shall be entitled to one (1) vote per Ordinary Share or Ordinary Share
into which such Preferred Share or Ordinary-Preferred Share is convertible at the time of
voting, whether in a vote by show of hands, secret ballot or written consent. Each holder
of Preferred Shares and Ordinary-Preferred Shares shall vote together with the Ordinary
Shares as a single class (except as otherwise expressly provided in these Articles or as
required by law) and shall be entitled to notice of any general meeting of shareholders in
accordance with these Articles. Fractional votes shall not be permitted and any fractional
vote resulting from the conversion mechanism described above in these Articles shall be
rounded up or down to the nearest whole number (with one-half (1/2) being rounded upward). 






	12.  	PROTECTIVE
PROVISIONS 






	 	(a) 	Until
the QIPO, the Company shall not take any of the following actions without
          approval of the Majority Preferred Shareholders (which may be obtained by way
of           a written consent and shall not require the convening of a shareholders
meeting           for such purpose, unless required by applicable law): 






	 	(1) 	any
amendment to or modification of these Articles and/or the Memorandum of
          Association of the Company or any other action which would amend, change or
          modify the rights, preferences or privileges of the Preferred Shares.  






	 	(2) 	declaration
of any dividend;  






	 	(3) 	the
authorization of any share capital, or other rights or securities           convertible
into or exchangeable for share capital, or the conversion of any           existing
shares into shares, in each case with rights equal to or superior to           the rights
of the Preferred Shares;  







- 16 -







	 	(4) 	any
action or transaction which is outside the business of the Company as
          contemplated in the Updated Work Plan of the Company (as defined in the Poalim
          Agreement);  






	 	(5) 	any
transaction of the Company or of any subsidiary thereof, with either or both           of
the Founders, or with any entity affiliated with the Founder(s) in any way;  






	 	(6) 	any
action which effects a merger, reorganization, liquidation, disposition,
          acquisition or sale of the Company or of any subsidiary thereof, or any
transfer           of a material asset of the Company or of any subsidiary thereof, or
the creation           of or purchase of or into any entity;  






	 	(7) 	any
action which may alter or change the capital structure of the Company or of           any
subsidiary thereof, any action which effects a reclassification or
          recapitalization of the outstanding capital shares of the Company, and any
          increase in the registered share capital of the Company or of any subsidiary
          thereof;  






	 	(8) 	the
creation of any guarantee, mortgage, pledge or security interest in a           material
asset, or in all or substantially all of the assets of the Company or a
          subsidiary;  






	 	(9) 	the
replacement of the independent auditors to the Company, which in any event
          shall be one of the “big four”; and  






	 	(10) 	the
incurrence by the Company or by any subsidiary thereof of any indebtedness           that
shall exceed the sum of $250,000 (Two Hundred Fifty Thousand US Dollars),
          calculated on a cumulative basis in respect of any one transaction or in
respect           of a series of connected transactions;  






	 	(b) 	Until
the QIPO, the Company shall not issue any securities of any kind or           options to
purchase securities of any kind without the approval of the majority           of the
directors appointed by the holders of the Preferred Shares, provided           however
that shares issued upon the exercise of warrants, options, or other           rights
outstanding as of the closing of the Poalim Agreement or the closing of           the
Wellington Agreement or the grant of options (and shares issued upon           exercise
of such options) under the Company’s incentive plans are not           subject to
such approval. 






	 	(c) 	Any
amendment or modification of the rights and obligations of the Founders set
          forth in Article 14 (Preemptive Rights), Article 29B(b) (Bring Along), Article
          29C (No Sale) and Article 65(a)(1) (participation of the Founders in the Board)
          shall require the consent of at least one of the Founders. 






	 	(d) 	Any
amendment or modification of the rights and obligations of Intel set forth           in
Article 29(e) (Right of First Refusal), Article 29A (Co-Sale) and Article
          29(B)(c) (Bring Along) and 65(c) (Directors) shall require the consent of
Intel. 






- 17 -







	 	(e) 	Any
amendment to or modification of these Articles which would adversely amend,
          change or modify the rights, preferences or privileges of the
Ordinary-Preferred           Shares shall require the consent of the holders of at least
66% of the           Ordinary-Preferred Shares. 






	 	
Furthermore,
the authorization of any additional shares of Ordinary-Preferred Shares or any rights or
securities convertible into or exchangeable for Ordinary-Preferred Shares, or the
conversion of any other class of shares into Ordinary-Preferred Shares or the unification
of the Ordinary-Preferred Shares with another class of shares shall require the consent
of the holders of at least 66% of the Ordinary-Preferred Shares. 






	 	
Notwithstanding
the aforesaid, any amendment, modification, termination or waiver of the provisions of
these Articles that applies to the rights of the holders of Ordinary-Preferred Shares in
the same proportional manner and without treating them proportionally different from the
Series AA Preferred Shares, shall not require the consent of the holders of the
Ordinary-Preferred Shares. For illustration purposes, any change, including cancellation,
of the Secondary Preference Amount, but not the manner of allocation of the Secondary
Preference Amount between the holders of the Series AA Preferred Shares and the holders
of the Ordinary-Preferred Shares as set forth in Article 8(d), shall not require the
consent of the holders of the Ordinary-Preferred Shares. 






	 	(f) 	Until
the QIPO, the Company shall not take, without the consent of the holders           of at
least a majority of the issued and outstanding Preferred Shares of the           affected
class, an action that amends or modifies the rights attached to such           class of
Preferred Shares, provided however that (a) the authorization or           issuance of a
new class of shares with preferential rights, or (b) a change,           waiver of other
modification that applies to the rights of the Preferred Shares           in the same
proportional manner and without treating a certain series           proportionally
different from the other series, in each case – that was           approved by
holders of a majority of the issued and outstanding Preferred           Shares, shall not
be deemed a change hereunder. 






	 	(g) 	Until
the QIPO, the Company shall not take, without the consent of the holders           of at
least a majority of the issued and outstanding Series BB Preferred Shares
          (which must include also the affirmative consent of the holders of at least 70%
          of the Series BB-1 Preferred Shares and Series BB-3 Preferred Shares (voting
          together as one group) that were issued at the closing of the Poalim Agreement
          and at the closing of the Wellington Agreement to investors who were not
          shareholders of the Company immediately prior to the closing of the Poalim
          Agreement or affiliates or Permitted Transferees of such shareholders (the
          “Special BB Consent”)) an action that effects (i) any change
or           waiver of rights of the Series BB Preferred Shares that does not apply to
the           rights of all Preferred Shares in the same proportional manner and that
treats a           certain series proportionally differently from the other series; (ii)
any waiver           of liquidation preferences, anti-dilution, board representation or
information           rights of the Series BB Preferred Shares, (iii) an IPO, merger or
the sale of           all or substantially all of the Company’s shares or assets,
unless, in each           such case, the applicable IPO or transaction reflects a price
per share of more           than two times the Original Issue Price of the Series BB-1
Preferred Shares (a           “Qualified Transaction”), or (iv)
conversion of the Series BB           Preferred Shares, other than as part of, and
conditioned upon the closing of, a           Qualified Transaction. 






- 18 -







	 	(h) 	The
required consents as set forth in Articles 12(a) – (g) above shall also
          apply to any action taken by any wholly owned subsidiary of the Company. 






	13.  	ALLOTMENT
OF SHARES 






	 	
Subject
to the provisions of Articles 12 and 14, the authorized but unissued shares shall be
under the control of the Board of Directors, who shall have the power to allot shares or
otherwise dispose of them to such persons, on such terms and conditions (including,
inter-alia, terms relating to calls as set forth in Article 31 hereof), and either at
par or at a premium, or, subject to the provisions of the Companies Law, at a discount,
and at such times, as the Board of Directors may think fit, and the power to give any
person the option to acquire from the Company any shares, either at par or at premium, or
subject as aforesaid, at a discount, during such time and for such consideration as the
Board of Directors may think fit. 






	14.  	PREEMPTIVE
RIGHTS 






	 	(i) 	Until
the QIPO, the provisions of this Article 14 shall apply: 






	 	(1) 	Any
Additional Securities (as defined in Article 9 above) to be issued by           the
Company (the “Offered Securities”) shall first be offered           by
the Board of Directors by written notice to each Major Holder and Founder,           for
as long as such Founder holds shares in the Company (for purposes of this
          Article 14, the “Offerees”). The number of Offered Securities
          offered to each Offeree shall be the result of the multiplication of the
Offered           Securities by a fraction: (i) the numerator of which shall be the
total           number of outstanding Ordinary Shares of the Company (on an as-converted
basis)           held by such Offeree as determined prior to the offer made pursuant to
this           Article 14, and (ii) the denominator of which is the total
number of           outstanding Ordinary Shares of the Company (on an as-converted
basis), as           determined prior to the offer made pursuant to this Article 14.  






	 	(2) 	The
Company shall provide each Offeree with a Notice (the “Notice of           Offer”)
specifying the number of Offered Securities he is entitled to           purchase and
which shall state the terms of the proposed issuance, and any such           Offeree may
accept such offer, as to all or any part of the Offered Securities           so offered
to him, by giving the Company written notice of acceptance within           twenty (20)
days after being served with such Notice of Offer; provided,           however, that the
Founders may only exercise such right for their own benefit           through their
available funds, provided that if the purchase by such           Offeree is being
effected prior to, or concurrently with such issuance of           Offered Securities
(rather than subsequent thereto) then such Offeree shall be           obligated to
consummate the purchase of such Offered Securities only if the           Company
consummates the sale of the balance of the Offered Securities pursuant           to the
terms described in such Notice of Offer  






	 	(3) 	Any
and all preemption rights set forth in this Article 14, may be exercised by           a
Permitted Transferee of a Major Holder instead of by such Major Holder if such
          Major Holder so notifies the Company in writing.  






- 19 -







	 	(j) 	Any
Offered Securities not subscribed for by the Offeree as aforesaid, shall be
          under the control of the Board of Directors and may be issued without regard to
          this Article 14, except to the extent that said Offered Securities may not
          be allotted on terms more favorable to the purchaser than those offered
pursuant           to this Article 14. In the event the Offered Securities are not
acquired by           the expiration of 120 days from the date of expiration of the
twenty (20) day           period referred to in Article 14(a)(2), they may not be
issued except by           compliance with the provisions of Article 14. 






	15.  	REGISTERED
HOLDER 






	 	(a) 	If
two or more persons are registered as joint holders of a share they shall be
          jointly and severally liable for any calls or any other liability with respect
          to such share. However, with respect to voting, power of attorney and
furnishing           notices, the one registered first in the register of shareholders,
insofar as           all the registered joint holders shall not notify the Company in
writing to           relate to another one of them as the sole owner of the share, as
aforesaid,           shall be deemed to be the sole owner of the share. 






	 	(b) 	In
the case that two or more persons are registered together as holders of a
          share, each one of them shall be permitted to give receipts binding all the
          joint holders for dividends or other monies in connection with the share and
the           Company shall be permitted to pay all the dividends or other monies due
with           respect to the share to one or more of the joint holders, as it shall
choose. 






	 	(c) 	Except
as otherwise provided in these Articles, the Company shall be entitled to           treat
the registered holder of any share as the absolute owner thereof, and,
          accordingly, shall not, except as ordered by a court of competent jurisdiction,
          or as required by statute, be bound to recognize any equitable or other claim
          to, or interest in, such share, on the part of any other person. 






	16.  	SHARE
CERTIFICATE 






	 	(a) 	A
shareholder shall be entitled to receive from the Company without payment, one
          certificate that shall contain that number of shares registered in the name of
          such shareholder, their class and serial numbering. However, in the event of
          joint holders holding a share, the Company shall not be obligated to issue more
          than one certificate to all of the joint holders, and the delivery of such a
          certificate to one of the joint holders shall be deemed to be a delivery to all
          of the joint holders. 






	 	(b) 	Each
certificate shall carry the signature or signatures of a director or such           other
persons appointed by the Board of Directors for this purpose and the           rubber
stamp or the seal of the Company. 






	 	(c) 	If
a share certificate is defaced, lost or destroyed, it may be replaced upon
          payment of such fee, if any, and on such terms, if any, as to evidence and
          indemnity as the Board of Directors may think fit. 






- 20 -







	17.  	MODIFICATIONS
OF SHARE RIGHTS 






	 	
If
at any time the share capital is divided into different classes of shares (unless
otherwise provided for by the terms of issue of the shares of that class) it shall be
permitted, subject to the provisions of Article 12 above, to change, convert,
broaden, add or vary in any other manner the rights, advantages, restrictions and
provisions attached at that time to one or more of the classes by a resolution of the
general meeting of the shareholders of the Company, without the need for any separate
class vote or class meeting. 






	 	
It
is hereby clarified that any resolution required to be adopted pursuant to these Articles
by the consent of a separate class of shares, whether by way of a separate general meeting
of such class or by way of written consent, shall be given by the holders of shares of
such class entitled to vote or give consent thereon and no holder of shares of a certain
class shall be banned from voting or consenting by virtue of being a holder of more than
one class of shares of the Company, irrespective of any conflicting interests that may
exist between such different classes of shares. A shareholder shall not be required to
refrain from participating in the discussion, voting and/or consenting on any resolution
concerning an amendment to any class of shares held by such shareholder, due to the fact
that such shareholder may benefit in one way or another from the outcome of such
resolution. 






	 	
Without
derogating from the need to receive any consents or approvals required pursuant to Article
12, it is hereby clarified and agreed that the enlargement of an existing class of shares,
or the issuance or allotment of additional shares thereof, or the creation of additional
shares of that class as a result of conversion of shares from another class or unification
with another class, shall not be deemed, for purposes of these Articles, to amend, change,
vary, modify or abrogate the rights attached to the previously issued shares of such class
or of any other class. 






PLEDGE 



     	18.	
          The Company shall have a lien and first pledge on all the shares, not fully
          paid, registered in the name of any shareholder (whether registered in his name
          only or together with another or others) and on the proceeds from the sale
          thereof, for any amount still outstanding with respect to that share, whether
          presently payable or not. Such a pledge shall exist whether the dates of payment
          or fulfillment or execution of the obligations, debts or commitments have become
          due or not, and shall apply to all dividends that shall be decided upon from
          time to time in connection with these shares. No benefit shall be created with
          respect to this share based upon the rules of equity which shall frustrate this
          pledge, however the Board may declare at any time with respect to any share,
          that it is released, wholly or in part, temporarily or permanently, from the
          provisions of this article. 


          



     	19.	
          The Company may sell, in such manner and at such time as the Board thinks fit,
          any of the pledged shares, but no sale shall be made unless the date of payment
          of the monies or a part thereof has arrived, or the date of fulfillment and
          performance of the obligations and commitments in consideration of which the
          pledge exists has arrived, and after a written request has been furnished to the
          shareholder or person who has acquired a right in the shares, which sets out the
          amount or obligation or commitment due from him and which demands their payment,
          fulfillment or execution, and which informs the person of the Board’s
          desire to sell the shares in the event of non-fulfillment of the notice, and the
          person has not fulfilled his obligation pursuant to the notice within seven days
          after the notice has been sent to him. 


          



- 21 -







     	20.	
          The net proceeds of such sale after payment of the costs thereof, shall be
          applied in payment of such sum due to the Company or to the fulfillment of the
          obligation or commitment (including debts, liabilities and engagements which
          have not yet fallen due for payment or satisfaction), and the remainder (if
          there shall be any) shall be paid to the shareholder or to the person who has
          acquired a right in the share sold pursuant to the above. 


          



     	21.	
          After execution of a sale as aforesaid, the Board shall be permitted to sign or
          to appoint someone to sign a deed of transfer of the sold shares and to register
          the buyer’s name in the register of shareholders as the owner of the sold
          shares and it shall not be the obligation of the buyer to supervise the
          application of monies nor will his right in the shares be affected by a defect
          or illegality in the sale proceedings after his name has been registered in the
          register of shareholders with respect to those shares. The sole remedy of any
          person aggrieved by the sale shall be in damages only and against the Company
          exclusively. 


          



TRANSFER OF SHARES AND
THE MANAGEMENT THEREOF 



     	22.	
          Each transfer of shares shall be made in writing in the form appearing herein
          below, or in a similar form, or in any form as to be determined upon by the
          Board from time to time, such form shall be delivered to the Office together
          with the transferred share certificates and any other proof the Board shall
          require, if it shall so require, in order to prove the title of the transferor.
          The instruments and documents notifying the Company with respect to the transfer
          are a prerequisite to the effectuation of such transfer. Notwithstanding the
          above, any transfer of shares to any person or entity that is not at the time of
          transfer a shareholder of the Company and that competes with the Company,
          directly or indirectly, in the field of optical inspection or metrology for
          semiconductors or the transfer of shares which have not been fully paid up will
          require the consent and approval of the Board of Directors, except if such
          transfer is to a Permitted Transferee. 


          



Deed of Transfer of
Shares 



I, ____________ of _____________ in
consideration of the sum of NIS ________ (New Israeli Shekels) paid to me by
______________, of ____________ (hereinafter called “the said transferee”) do
hereby transfer to the said transferee ___________ share (or shares) having par value of
NIS ________ each one numbered ____ until ____ inclusive in Negevtech Ltd., to hold
unto the said transferee, his executors, administrators, and assigns, subject to the
conditions on which I held the same at the time of the execution hereof; and I, the said
transferee, do hereby agree to accept the said share (or shares) subject to the conditions
aforesaid. As witness we have hereunder set out hands the ______ day of _________ 20__. 





		
		
		
		
		
	_____________________	_____________________
	Transferee	Transferor
	 
	_____________________	_____________________
	Address	Address








	23.  	The
deed of share transfer shall be executed both by the transferor and           transferee,
and the transferor shall be deemed to remain a holder of the share           until the
name of the transferee is entered into the register of shareholders in           respect
thereof. 







- 22 -







	24.  	The
Company shall be permitted to demand a fee for registration of transfer, in           a
reasonable rate as to be determined by the Board from time to time, with the
          exception of transfers to Permitted Transferees. 






	25.  	The
Register shall be closed for a period of seven (7) days before every           ordinary
general meeting of the Company. 






	26.  	Upon
the death of a shareholder, the remaining holders (in the event that the
          deceased was a joint holder in a share) or the administrators or executors or
          heirs of the deceased (in the event the deceased was the sole holder of the
          share or was the only one of the joint holders of the share to remain alive)
          shall be recognized by the Company as the sole holders of any title to the
          shares of the deceased. However, nothing aforesaid shall release the estate of
a           joint holder of a share from any obligation with respect to the share that he
          held jointly with any other holder. 






	27.  	Any
person becoming entitled to a share in consequence of the death or           bankruptcy
or liquidation of a shareholder shall, upon such evidence being           produced as may
from time to time be required by the Board, have the right,           either to be
registered as a shareholder in respect of the share upon the           consent of the
Board or, instead of being registered himself, to transfer such           share to
another person, subject to the provisions contained in these Articles           with
respect to transfers. 






	28.  	A
person becoming entitled to a share because of the death of a shareholder           shall
be entitled to receive, and to give receipts for, dividends or other           payments
paid with respect to the share, but he shall not be entitled to receive           notices
with respect to Company meetings or to participate or vote therein with           respect
to that share, or aside from the aforesaid, to use any right of a           shareholder,
until he has been accepted as a shareholder with respect to that           share. 






	29.  	RIGHT
OF FIRST REFUSAL 






	 	(a) 	Until
the QIPO, a shareholder in the Company shall not be permitted to make any
          Transfer (as hereinafter defined) of his shares in the Company, other than to a
          Permitted Transferee, except pursuant to the following provisions set forth
          below. 






	 	
For
the purposes of this Agreement, the term “Transfer” shall mean any sale,
assignment, transfer, hypothecation or other encumbrance or disposition of in any way. 






	 	(b) 	A
shareholder, desirous of making any Transfer of the shares held by him to
          others, in whole or in part (hereinafter the “Transferor”)
          shall be obligated to offer them first to the Offerees (as defined in
          Article 14 above), by giving notice in writing to such Offerees
          (hereinafter “Sale Notice”). 






	 	(c) 	In
the Sale Notice the Transferor shall mention the number of shares he wishes           to
Transfer (hereinafter the “Offered Shares”), the price           forming
the consideration for the Offered Shares, the name of the transferee           (the “Transferee”)
and the other conditions of the sales. 






	 	(d) 	The
Sale Notice shall be irrevocable unless all of the Offerees agree otherwise. 






- 23 -







	 	(e) 	Each
of the Offerees may inform the Transferor in writing within 21 Business           Days
from the date of receipt of the Sale Notice as to his/her intention to           purchase
that number of Offered Shares, in whole or in part, which is the result           of the
multiplication of the Offered Shares by a fraction: (i) the           numerator of
which is the number of Ordinary Shares (on an as-converted basis)           of the
Company held by such Offeree and (ii) the denominator of which is           the
total number of outstanding Ordinary Shares (on an as-converted basis) held           by
all Offerees (hereinafter the “Offerees’ Offered           Shares”),
the purchase of which shall be at the purchase price and in           accordance with the
payment conditions as provided for in the Sale Notice           (hereinafter the “Purchase
Notice”). An Offeree who has           submitted a Purchase Notice shall be
referred to hereinafter as           “Buyer”. Notwithstanding the
foregoing, Intel (to the extent it           is a Major Holder) shall be required to
provide the Transferor with a Purchase           Notice within 10 days of receipt of the
Sale Notice and, in the event Intel is           the Transferor, the Offerees will be
required to provide Intel with a Purchase           Notice within 10 days of receipt of
the Sale Notice. 






	 	(f) 	Thereafter,
the Transferor shall give each Buyer who has fully exercised his           rights
pursuant to Article 29(e) a written notice (the “Excess           Notice”)
stating the amount of Offered Shares with respect to which no           Purchase Notice
was submitted (hereinafter referred to as “Excess           Offered Shares”)
and each such Buyer shall be entitled, subject to           Article 29(j) below, provided
he so notifies the Transferor in writing (the           “Excess Reply Notice”),
such Excess Reply Notice to be received           by the Transferor within 7 Business
Days following the delivery by the           Transferor to such Buyer of the Excess
Notice, to purchase any or all of such           Excess Offered Shares. 






	 	(g) 	If
by the end of the time referred to in Articles 29(e) and 29(f) above no
          Purchase Notices have been received by the Transferor or the Transferor has
          received Purchase Notices with respect to a total number of shares that is less
          than the number of Offered Shares, the Transferor may, within 30 days from the
          expiration of the time for submission of the Purchase Notices or, in the event
          that Article 29(f) applies, the Excess Reply Notice, sell all (but not less
than           all) of the Offered Shares to the Transferee and/or to any Buyer that
submitted           a Purchase Notice and, if applicable, an Excess Notice, up to the
number of           shares requested to be purchased by such Buyer (though he shall be
under no           obligation to do so) at a price not less than the price mentioned in
the Sale           Notice (as linked to the representative rate of the U.S. dollar from
the day of           the furnishing of the notice to the date of sale in fact) and upon
all other           conditions not less favorable to the Transferor than those provided
for in the           Sales Notice. 






	 	(h) 	If
the Transferor shall not transfer the Offered Shares as aforesaid, within the
          period of time specified in Articles 29(e), (f) and (g) above, he shall be
          obligated, before selling the Offered Shares to another, to offer them again to
          the Offeree in accordance with the aforementioned procedure, and such procedure
          shall apply to any further offer. 






	 	(i) 	If
there have been received Purchase Notices and, if applicable, Excess Reply
          Notices, for a total number of shares equal to the number of Offered Shares,
          then every Buyer shall buy the number of shares as mentioned in the Purchase
          Notice and, if applicable, the Excess Reply Notices, he has submitted. 






- 24 -







	 	(j) 	If
Purchase Notices and Excess Reply Notices shall have been received for a           total
number of shares greater than the number of Offered Shares, the Buyers may
          acquire shares in a manner proportionate to the share capital of the Company
          held by them at that time, as determined in accordance with Article 29(e)
          above. However, no Buyer shall be required to buy a greater number of shares
          than the number provided for in the Purchase Notice and, if applicable, the
          Excess Reply Notice, submitted by him and upon the allocation to him of the
full           number of Offered Shares so requested by him in the Purchase Notice, such
Buyer           shall be disregarded for the purpose of any further allocation of the
remaining           Excess Offered Shares. 






	 	(k) 	In
every one of the events referred to in Articles 29(e), 29(f), 29(g),
          29(h), 29(j) and 29(i) the Transferor shall send within five (5) days after the
          last date for the submission of each of the Purchase Notices and the Excess
          Reply Notices to each of the Buyers, a notice accompanied by the copies of all
          Purchase Notices received by the Transferor of either non-acceptance of the
          offer pursuant to the Sale Notice or the acceptance thereof (hereinafter the
          “Acquisition Notice”). 






	 	(l) 	After
receipt of the Acquisition Notice notifying acceptance, each Buyer shall
          purchase from the Transferor, and the Transferor shall sell and transfer to
such           Buyer the number of shares referred to in such notice according to the
terms of           the Sale Notice (other than in circumstances set forth in Article 29(g)
          above, in which case the provisions of said Article 29(g) will apply).
Upon           the transfer to Buyer such shares must be free and clear of any liens or
          encumbrances unless otherwise specified in the Sale Notice. The Transferor and
          such Buyer shall each have all remedies for breach of contract available under
          applicable laws in connection with the transactions set forth in this
          Article 29. 






	 	(m) 	Any
Transfer of shares by any Offeree pursuant to the exercise of its co-sale
          rights under Article 29A shall not give the other Offerees additional rights of
          first refusal and shall be deemed to have been part of the Offered Shares and
          included in the Sale Notice to the extent that the number of the shares being
          Transferred has not changed as a result of the exercise of co-sale rights. To
          the extent such number has changed, the provisions hereof shall apply to the
          transaction again, ab initio, and the Transferor shall give a new Sale Notice
          hereunder. 






	29A  	CO
SALE






	 	(a) 	Should
any holder of Preferred Shares (other than Intel) or holder of
                    Ordinary-Preferred Shares (“Selling Shareholder”)
wish to make                     a Transfer, other than to a Permitted Transferee, then
each of the holders of                     Preferred Shares and Ordinary-Preferred Shares
other than Intel (the                     “Entitled Shareholders”) shall
have the right to participate in                     the Selling Shareholder’s
Transfer of such Offered Shares, in accordance                     with this Article 29A,
pursuant to the specified terms and conditions                     stated in the Sales
Notice, provided that an Entitled Shareholder who is also an                     Offeree
for purposes of Article 29 above shall be entitled to elect whether to
                    exercise its rights under either Article 29 or Article 29A and shall
not be                     entitled to contingently exercise its rights under both such
articles. Each of                     the Entitled Shareholders shall be entitled, upon
written notice to the Selling                     Shareholder within twenty-one (21)
Business Days after receipt of the Sales                     Notice (“Participating
Preferred Shareholders”), to sell to the                     Transferee up to
that number of the Shares in the Company owned by such                     Participating
Preferred Shareholder (the “Equity Shares”)
                    determined by multiplying the total number of Offered Shares times a
fraction                     the numerator of which is the number of Ordinary Shares
owned by such                     Participating Preferred Shareholders (on an
as-converted basis) and the                     denominator of which is the total number
of Ordinary Shares owned by all                     Participating Preferred Shareholders
(on an as-converted basis) and the Selling                     Shareholder. Such written
notice shall indicate, subject to the terms of this                     Article 29A, the
number of Shares that the Participating Preferred Shareholder                     intends
to transfer to the Transferee. At the closing of the sale of the Offered
                    Shares to the Transferee, the Selling Shareholder shall transfer his
shares to                     the Transferee only if the Transferee concurrently
therewith purchases, on the                     same terms and conditions specified in
the Article 29A Notice, all of the Shares                     as to which participation
notices have been delivered. 






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	 	(b) 	Notwithstanding
the provisions of Article 29A(a), no Transfer in one transaction                     or
in a series of related transactions, of shares representing more than 50% of
                    the issued and outstanding shares of the Company (on an as converted
basis) may                     be made, other than to a Permitted Transferee, unless the
proposed Transferee of                     such shares offers to purchase the remaining
issued and outstanding shares of                     the Company upon the same terms and
conditions. In such event, the consideration                     payable by the
Transferee shall be distributed among all selling shareholders
                    participating in such Transfer in accordance with the terms of
Article 8. 






	29B  	BRING
ALONG






	 	(a) 	At
any time prior to the Company’s QIPO, in the event that: 






	 	
Shareholders
holding 60% (sixty percent) or more (the “Threshold Percent”) of the
Company’s issued and outstanding shares, on an as converted basis (the “Proposing
Shareholders”) accept an offer to affect a Merger or Acquisition (the
“Offer”); and 






	 	
Such
Merger or Acquisition is conditioned upon the consent and/or sale of all of the remaining
issued shares of the Company; then all remaining shareholders (the “Non Proposing
Shareholders”) will be required, if so demanded by the Proposing Shareholders,
to vote in favor of, execute the relevant documents, and otherwise take all necessary and
reasonable actions relating to such Offer, including to sell their shares upon the same
terms and conditions as in the Offer made to the Proposing Shareholders and the proceeds
shall be allocated in accordance with the provisions of Article 8, provided however, that
absent the written consent of the holders of the majority of the outstanding Series BB
Preferred Shares (which must include also the Special BB Consent), the holders of the
Preferred Shares shall not be forced to take any actions or sell their shares as
aforesaid, if the Merger or the Acquisition does not reflect a Company price per share of
more than two times the Original Issue Price of the Series BB-1 Preferred Shares. In the
event that the Threshold Percent is met, any sale, assignment, transfer, pledge,
hypothecation, mortgage, disposal or encumbrance of the Shares by the Non Proposing
Shareholders other than in connection with the Offer, shall be absolutely prohibited. 






- 26 -







	 	(b) 	Any
sale, transfer or exchange of the shares or all or substantially all of the
          assets of the Company pursuant to Article 29B(a) above which gives rise to a
tax           liability of either of the Founders (any such transaction, a “Taxable
          Transaction”) will be dealt with in one (1) of the following two (2)
          ways: 






	 	(1) 	if
the Taxable Transaction is a bona fide transaction with a third
               party unrelated to the Company or any of its directors or shareholders,
the                Taxable Transaction shall be contingent, unless otherwise agreed by
the                Founders, upon the Taxable Transaction’s including the receipt by
each of                the Founders of (A) cash or liquid assets reasonably
acceptable to the                Founders, in either case not subject to transfer
prohibition and in an amount                sufficient to pay each Founder’s tax
liability, if any, in connection with                the Taxable Transaction or (B) a
loan as described in Article 29B(b)(2)                below; or  






	 	(2) 	in
any other event, such transaction shall be contingent, unless otherwise
               agreed by the Founders, upon the Taxable Transaction’s providing for
a loan                to each of the Founders in an amount sufficient to pay his tax
liability, if                any, in connection with the Taxable Transaction, such loan
to be linked to the                U.S. Dollar but without interest and repayable upon
the sale of each Founder of                the shares or other non-cash consideration
received by him in the Taxable                Transaction, and to be non-recourse other
than in respect of such shares or                other non-cash consideration received by
the Founders in the Taxable                Transaction.  






	 	(c) 	Notwithstanding
the foregoing, the obligation of Intel to sell its shares (the “Transaction”)
pursuant to this Article 29B shall be subject to           the satisfaction of each of
the following conditions: 






	 	(i) 	Form
of Consideration. Intel shall not be required to accept any
               consideration for its shares other than cash or freely tradeable equity
               securities (subject to a lock-up period of no more than 90 days following
the                issuance of such securities to Intel) which have been admitted to or
listed upon                (i) the Official List of the UK Listing Authority or (ii) the
New York or                American Stock Exchange or the NASDAQ National Market in the
United States of                America or (iii) the Neuer Markt or (iv) Euronext Paris
S.A. or (v) such other                stock exchange as Intel may agree.  






	 	(ii) 	Equal
Consideration. Subject to section (iii) below, upon the                consummation
of the Transaction, all of the holders of Preferred Shares will                receive
the same form and amount of consideration per Preferred Share,
               respectively, taking into account any liquidation preference to which the
               holders of Preferred Shares are entitled, and if any holders of Preferred
Shares                are given an option as to the form and amount of consideration to
be received,                all holders will be given the same option.  






	 	(iii) 	Costs/Expenses.
Intel shall not be required to incur any costs or                expenses (without
limitation whether by way of out of pocket expenses or by way                of set off)
in connection with the Transaction except its pro rata share of any                costs
incurred for the benefit of all of the Company’s shareholders and for
               which Intel has agreed in writing to be responsible in advance of such
costs                being incurred. For the avoidance of doubt Intel shall be solely
responsible for                any costs that it decides to incur including the costs of
its own counsel.  






- 27 -







	 	(iv) 	Representations,
Warranties and Indemnities. The only representations,                warranties or
indemnities that Intel shall be required to make in connection                with the
Transaction are representations, warranties and indemnities concerning                (i)
legal ownership of the Company’s securities to be sold by Intel (the
               “Intel Securities”), and (ii) the corporate authority of
Intel                to convey title to the Intel Securities, and the ability to do so
free and clear                of liens, encumbrances or adverse claims (the “Intel
Required                Obligations”). The Intel Required Obligations shall be
in the same form                as those to be given by each of the other shareholders of
the Company and shall                be given by Intel on a several (but not joint) basis
only.  






	 	(v) 	Liability.
Intel shall not accept, assume or be deemed to have assumed                any joint, or
joint and several, liability with any other shareholder(s), the                Company or
any other party, with respect to any representation, warranty,                indemnity,
covenant or combination thereof made by such other shareholder(s),                the
Company or other party in connection with the Transaction. Intel’s
               liability shall in any event be limited to the amount of consideration
actually                received by Intel in cleared funds.  






	 	(vi) 	Escrow
and Liability upon Escrow. In the event that consideration for any                of
the shares in the Company is to be placed in escrow (the “Escrow                Amount”),
such Escrow Amount will not exceed 15% of the total consideration                payable
to all shareholders of the Company and that the Escrow Amount, to the
               extent that no claim has been made against it and for such amount as might
               remain following such claim, will be released to the shareholders at the
latest                three (3) months following the end of the acquiring company’s
first                accounting period after the consummation of the transfer of Intel’s
shares                or eighteen (18) months after the consummation of such transfer
(the later of                the two). Intel’s liability shall be limited to its pro
rata share of the                Escrow Amount (Intel’s pro rata share to be
calculated on the basis of the                consideration due to Intel as a proportion
of the aggregate consideration due to                all shareholders in the Company).
For the avoidance of doubt, the Escrow Amount                may be used to satisfy
claims arising out of breaches by the Company of                representations and
warranties given by the Company in connection with a                Transaction, all
subject to the foregoing terms and conditions.  






	 	(vii) 	US
Securities. If the consideration proposed for Intel’s shares is
               in the form of securities of an issuer incorporated in the United States,
Intel                shall not be obligated to participate in the Transaction unless it
is provided                an opinion of counsel to the effect that the sale in
connection with such                Transaction is not in violation of the registration
or qualification                requirements of federal or applicable state securities
laws in the United                States, or, if Intel is not provided with such an
opinion, the Company shall                indemnify Intel for any violation.  






- 28 -








	 	(vii) 	Other
Agreements. Intel shall not be required to amend, extend or                terminate
any contractual or other relationship with the Company, the acquirer                or
their respective affiliates.  







	 	(viii) 	Covenant
Not to Compete. Intel shall not be required to agree to any                covenants
including without limitation any covenant not to compete or any                covenant
not to solicit any of the customers, employees or suppliers of any                party
to the Transaction.  






	 	
Furthermore,
notwithstanding the foregoing, the obligation of Orbotech to sell its shares (the “Orbotech Transaction”)
pursuant to this Article 29B shall be subject to the condition that the only
representations, warranties or indemnities that Orbotech shall be required to make in
connection with the Orbotech Transaction are representations, warranties and indemnities
concerning (i) legal ownership of the Company’s securities to be sold by Orbotech
(the “Orbotech Securities”), and (ii) the corporate authority of
Orbotech to convey title to the Orbotech Securities, and the ability to do so free and
clear of liens, encumbrances or adverse claims (the “Orbotech Required Obligations”).
The Orbotech Required Obligations shall be in the same form as those to be given by each
of the other shareholders of the Company and shall be given by Orbotech on a several (but
not joint) basis only. 






	29C.  	NO
SALE 






	 	(a) 	Until
the close of business on December 31, 2005, subject to Articles 29C(b) and           (c)
below and Article 29D below, neither Founder shall make any transfer,
          assignment, pledge, or other disposal (a “Disposition”) of the
          issued and outstanding share capital of the Company held by him upon execution
          of the Star Agreement, and any shares of the Company hereafter acquired by any
          such Founder as a result of his holding of such shares (collectively referred
to           as the: “Limited Shares”), either directly or
          indirectly. 






	 	(b) 	Notwithstanding
the above, in the event that the Company’s IPO has not           occurred prior to
the expiration of eighteen months following the execution of           the Star
Agreement, (the “Initial Period”) then during each           year
commencing upon the expiration of the Initial Period, each Founder shall be
          entitled to make a Disposition of Limited Shares representing up to an
aggregate           of ten percent (10%) of the Limited Shares held by such Founder (the
          “10% Allowance”), provided however that prior to the IPO, the
          aggregate of such Dispositions shall be not more than twenty five percent (25%)
          of the Limited Shares in the aggregate. Any 10% Allowance not sold by a Founder
          during any one year may be accumulated by such Founder in respect of the
          following year or years. 






	 	(c) 	The
restrictions set forth in this Article 29C shall expire upon and in           connection
with the IPO or on the close of business on December 31, 2005, the           earlier of
the two. Nothing in this Article shall have any effect upon the           requirement to
offer any shares sold as part of the 10% Allowance to the           Offerees as set forth
in Article 29 or to receive the consent of the Board of           Directors to the
transfer of any shares to a competitor of the Company (which           may be obtained
prior to or after offering the shares to the other shareholders)           or upon its
authority to refuse to consent to the share transfer. 







- 29 -







	29D.  	SALE
OF SHARES BY THE FOUNDERS 






	 	
Anything
to the contrary herein notwithstanding, the sale of shares by the Founders pursuant to the
Share Transfer Agreement shall not be subject to the restrictions on transfer set forth in
Articles 29 (“Right of First Refusal”), 29A (“Co Sale”) or 29C
(“No Sale”). 






	29E.  	STAND
STILL 






	 	
Notwithstanding
anything to the contrary in these Articles, any issuance of securities by the Company, and
any sale, transfer, pledge, encumbrance or other disposal of any of the securities of the
Company (by the Company or any shareholder), or any other action (including repurchase of
any shares of the Company by the Company or by any subsidiary thereof), other than any
action in which the provisions of Article 29B (Bring Along) shall apply, which results in
a Strategic Investor (as defined below) whether or not a shareholder of the Company,
holding (together with affiliates, Permitted Transferees, or other parties acting in
concert with it) more than 20% of the voting rights in the Company, is prohibited unless
approved in writing in advance by the Majority Preferred Shareholders (excluding, for the
purposes of such majority, any Strategic Investors and their affiliates and Permitted
Transferees or other parties acting in concert with them) and on terms and conditions
approved by them. Any of the transactions set forth in the forgoing sentence not so
approved shall be null and void and shall not be registered in the Company’s
Shareholders Register. For purpose hereof a “Strategic Investor” shall mean a
corporation or other business entity whose business is related to the Company’s
business and who is likely to have a business or technologic interest in the
Company’s business, as distinguished from an interest for the sole purpose of a
financial investment. 






CALLS  



	30. 	A
shareholder shall not be entitled to receive dividends nor to use any right a
          shareholder has, or receive any benefit or entitlement stated in these Articles
          (including without limitation, the rights set forth in Articles 7, 8, 11, 12,
          14, 29, 29A, 65 and 86 hereof), unless he has paid all the calls that shall be
          made from time to time prior to or on the date appointed for payment thereof,
          with respect of money unpaid on all of his shares, whether he is the sole
holder           or holds the shares together with another person, in addition to
interest and           expenses if there shall be any. 






     	31.	
          The Board may, subject to the provisions of these Articles, make calls upon the
          shareholders from time to time in respect of any moneys unpaid on their shares,
          as they shall determine proper, upon the condition that there shall be given
          prior notice of fourteen (14) days on every call and each shareholder shall be
          obligated to pay the total amount requested from him, or the installment on
          account of the call (if there shall so be) at the times and places to be
          determined by the Board. 


          



     	32.	
          The calls for payment shall be deemed to have been requested from the date the
          Board shall have decided upon the calls for payment. 


          



- 30 -







     	33.	
          The joint holders of a share shall be jointly and severally liable to pay the
          calls for payment in full and the installment on account, in connection with
          such calls. 


          



     	34.	
          If a sum called in respect of a share is not paid the holders of the share or
          the person to whom it has been issued shall be liable to pay interest and
          linkage differentials upon the amount of the call or the payments on account, as
          determined by the Board of Directors commencing from the day appointed for the
          payment thereof to the time of actual payment, but the Board shall be at liberty
          to waiver payment of that interest, wholly or in part. 


          



     	35.	
          Any amount that according to the condition of issuance of a share must be paid
          at the time of issuance or at a fixed date, whether on account of the sum of the
          share or premium, shall be deemed for the purposes of these Articles to be a
          call of payment that was made duly and the date of payment shall be the date
          appointed for payment. In the event of non-payment of this amount all of the
          Articles herein dealing with payment of interest, expenses, forfeiture, pledge
          and the like and all the other Articles connected therewith, shall apply, as if
          this sum had been duly requested and notice had been given, as aforesaid. 


          



     	36.	
          The Board may make arrangements at the time of issue of shares for a difference
          between the holders with respect to the amount of calls to be paid and the times
          of payment, and the rate of interest. 


          



     	37.	
          The Board may, if it thinks fit, receive from any shareholder willing to pay in
          advance all of the monies or a part thereof that shall be due on account of his
          shares, in addition to any amounts or a part thereof that shall be due on
          account of his shares, in addition to any amounts that the payment in fact has
          been requested and they shall be permitted to pay him interest at the rate the
          Board and shareholders shall agree upon, for the amounts paid in advance as
          aforesaid, or upon the part thereof which is in excess of the amounts whose
          payment was at the time requested on account of his shares in connection with
          which the payments have been made in advance, in addition to paying dividends
          that will be paid for that part of the share which has been paid in advance. The
          Board of Directors may at any time repay any amount so advanced without premium
          or penalty by giving such shareholder seven days’ prior notice in writing.
          Nothing in this Article 37 shall derogate from the right of the Board of
          Directors to make any call before or after receipt by the Company of any such
          advance. 


          



FORFEITURE OF SHARES 



     	38.	
          If a shareholder fails to pay any call or installment of a call on the day
          appointed for payment thereof, the Board may, at any time thereafter during such
          time as any part of such call or installment remains unpaid, serve a notice on
          him requiring payment of so much of the call or installment as is unpaid,
          together with any interest which may have accrued and any expenses that were
          incurred as a result of such non-payment. 


          



     	39.	
          The notice shall name a further day, not earlier than the expiration of seven
          days from the date of the notice, on or before which the amount of the call or
          installment or a part thereof is to be made together with interest and any
          expenses incurred as a result of such non-payment. The notice shall also state
          the place the payment is to be made and that in the event of non-payment, at or
          before the time appointed, the shares in respect of which the call was made will
          be liable to be forfeited. 


          



- 31 -







     	40.	
          If the requirements of any such notice as aforesaid are not complied with, any
          share in respect of which the notice has been given may at any time thereafter,
          before the payment required by the notice has been made, be forfeited by a
          resolution of the Board to that effect. In such event, the provisions of Section
          181 of the Companies Law shall apply, and the shares so forfeited shall be
          “dormant shares” as provided for therein. The forfeiture shall include
          those dividends that were declared but not yet distributed, with respect to the
          forfeited shares. 


          



     	41.	
          A share so forfeited shall be deemed to be the property of the Company and can
          be sold or otherwise disposed of, on such terms and in such manner as the Board
          thinks fit, subject to applicable law. Such shares shall not be deemed, for the
          purposes of these Articles, to comprise part of the issued and outstanding share
          capital of the Company, and shall be disregarded for the purposes of
          calculations based thereon. At any time before a sale or disposition the
          forfeiture may be canceled on such terms as the Board thinks fit. 


          



     	42.	
          A person whose shares have been forfeited shall cease to be a shareholder in
          respect of the forfeited shares, but shall notwithstanding remain liable to pay
          to the Company all monies which, at the date of forfeiture, were presently
          payable by him to the Company in respect of the shares, but his liability shall
          cease if and when the Company receives payment in full of all moneys that, at
          the date of forfeiture, were presently payable by him to the Company in respect
          of the shares (including interest and expenses). 


          



     	43.	
          Without derogating from Article 30 above, the forfeiture of a share shall cause,
          at the time of forfeiture, the cancellation of all rights in the Company or any
          claim or demand against it with respect to that share and the other rights and
          obligations between the share owner and the Company accompanying the share,
          except for those rights and obligations not included in such a cancellation
          according to these Articles or that the Companies Law imposes upon former
          shareholders. 


          



     	44.	
          The provisions of these Articles as to forfeiture shall apply in the case of
          non-payment of any sum which, by the terms of issue of a share, becomes payable
          at a fixed time, whether on account of the nominal value amount of the share, or
          by way of premium, as if the same had been payable by virtue of a call duly made
          and notified. 


          



MODIFICATION OF CAPITAL 



	45.  	Subject
to the provisions of Article 12 above and to any applicable law, the           Company
may, from time to time, by resolution duly adopted according to these           Articles: 






	 	(a) 	consolidate
and divide all or any of its issued or unissued share capital into           shares of
larger nominal value than its existing shares; 






	 	(b) 	cancel
any shares which have not been taken or agreed to be taken by any person; 






	 	(c) 	by
subdivision of its existing shares, or any of them, divide the whole, or any
          part, of its share capital into shares of smaller amounts than is fixed by the
          Memorandum of Association in a manner that with respect to the shares created
as           a result of the division it will be possible within the resolution of
division           to grant to one or more shares a preferable right or advantage with
respect to           dividend, capital, voting or otherwise over the remaining share or
other similar           shares; 






- 32 -







	 	(d) 	reduce
its share capital and any fund reserved for capital redemption in the           manner
that it shall deem to be correct. 






INCREASE OF SHARE CAPITAL 



     	46.	
          Subject to the provisions of Article 12 above and to any applicable law, the
          Company shall be permitted from time to time, by resolution duly adopted
          according to these Articles, to increase its share capital – whether or not
          all its shares have been issued, or whether the shares issued have been paid in
          full – by creation of new shares. This new capital shall be in such an
          amount, divided into shares in such amounts and have such preferable or deferred
          or other special rights (subject always to the special rights conferred upon an
          existing class of share), subject to any condition and restrictions with respect
          to dividends, return of capital, voting or otherwise, all as shall be directed
          by the general meeting in its resolution sanctioning the increase of the share
          capital. 


          



     	47.	
          Subject to any decision to the contrary in the resolution sanctioning the
          increase in share capital, pursuant to these Articles, the new share capital
          shall be deemed to be part of the original share capital of the Company and
          shall be subject to the same provisions with reference to payment of calls,
          liens, title, forfeiture, transfer and otherwise as apply to the original share
          capital. 


          



GENERAL MEETINGS 



     	48.	
          A general meeting shall be held once in every calendar year at such time, being
          not more than fifteen months after the holding of the last preceding general
          meeting, and place as may be prescribed by the Board. The above mentioned
          general meetings shall be called “Annual General Meetings”. All other
          general meetings shall be called “Special General Meetings”. 


          



     	49.	
          Subject to the provisions of these Articles the function of the Annual General
          Meeting shall be to receive and to deliberate with respect to the profit and
          loss statements, the balance sheets, the ordinary reports and accounts of the
          Board and auditors; to declare dividends, to appoint auditors and to fix their
          salaries. Every other matter shall be deemed to be special and shall be
          discussed at a Special General Meeting. 


          



     	50.	
          The directors or anyone of them may, whenever they think fit, and upon a
          requisition in writing as provided for in the Companies Law, convene a Special
          General Meeting. Every such requisition shall include the objects for which a
          meeting should be convened, shall be signed by the requisitioners and shall be
          sent to the registered Office of the Company. If the Board of Directors does not
          convene a meeting within 21 days from the date of the submission of the
          requisition as aforesaid, the requisitioners may convene by themselves a
          meeting. However, the meeting which was so convened shall not be held after
          three months have passed since the date of the submission of the requisition. 


          



NOTICE OF GENERAL MEETINGS 



     	51.	
          A prior notice of 14 days at least shall be sufficient for any general meeting,
          including any meeting at which it is being proposed to amend the Memorandum of
          Association and/or Articles of Association and, accordingly, prior notice of at
          least 14 days shall be given with respect to the place, date and hour of the
          meeting, and in the event that a special matter shall be discussed, a general
          description of the nature of that matter. The notice shall be given, as herein
          below provided for, to the shareholders entitled pursuant to these Articles to
          vote at the meeting. The notice shall be sufficient for any meeting of
          shareholders including a meeting at which it is proposed to amend the Memorandum
          of Association and/or Articles of Association. If, by chance, a notice as
          aforesaid was not given or not received by a shareholder, this shall not amount
          to a disqualification of the resolution passed or disqualification of the
          proceedings held at that meeting. With the consent of all the shareholders who
          are entitled, at that time, to vote, it shall be permitted to convene all
          meetings and to resolve all types of resolutions, upon a shorter advance notice
          or without any notice and in such manner, generally, as such be approved by the
          shareholders. 


          



- 33 -







QUORUM 



     	52.	
          No deliberation shall be commenced with respect to any matter at the general or
          special meeting unless there shall be present a quorum at the time when the
          general meeting proceeds to deliberate. In any meeting a quorum shall be formed
          when there are present personally or by proxy not less than two shareholders who
          hold or represent together the majority of the voting rights of the issued share
          capital of the Company, providing that one of such two shareholders present
          shall be a holder of Preferred Share(s) of the Company. 


          



     	53.	
          If within half an hour from the time appointed for the meeting a quorum is not
          present, the meeting, if convened by the Board upon the demand of shareholders
          or upon the demand of less than 50% of the directors then in office or directly
          by such shareholders or directors, shall be cancelled. Otherwise, if within half
          an hour from the time appointed for the meeting a quorum is not present, the
          meeting shall stand adjourned to the same day in the next week at the same place
          and time, or any other day and/or any other hour and/or any other place as the
          Board shall notify the shareholders, and, if at the second meeting a quorum is
          not present within half an hour from the time appointed for the meeting any two
          shareholders present personally or by proxy shall be a quorum, and shall be
          entitled to deliberate and to resolve in respect of the matters for which the
          meeting was convened. Shareholders may participate by means of conference
          telephone or similar communications equipment by means of which all persons
          participating in the meeting can hear each other, and such participation in a
          meeting shall constitute attendance in person at the meeting. The secretary of
          the meeting shall confirm attendance by telephone to the Chairman. 


          



CHAIRMAN 



     	54.	
          The Chairman of the Board of Directors shall preside as chairman at all general
          meetings. If there is no Chairman or he is not present within 15 minutes from
          the time appointed for the meeting or if he shall refuse to preside at the
          meeting, the shareholders present shall elect one of the directors to act as
          Chairman, and if only one director is present he shall act as Chairman. If no
          directors are present or if they all refuse to preside at the meeting the
          shareholders present shall elect one of the shareholders present to preside at
          the meeting. The Chairman shall have no special rights or privileges and no
          second or casting vote. 


          



POWER TO ADJOURN 



     	55.	
          The Chairman may, with the consent of any meeting at which a quorum is present,
          and shall if so directed by the meeting, adjourn the meeting from time to time
          and from place to place, as the meeting shall decide. At an adjourned meeting no
          matters shall be discussed except for those permissible to be discussed at that
          meeting which decided upon the adjournment. 


          



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ADOPTION OF RESOLUTIONS 



     	56.	
          At every meeting a resolution put to the vote of the meeting shall be decided
          upon by a show of hands, unless before or upon the declaration of the result of
          the show of hands a secret ballot in writing be demanded by the Chairman (if he
          is entitled to vote) or by any shareholder present, in person or by proxy, and
          entitled to vote at the meeting. Except if a secret vote is demanded as
          aforesaid, the declaration of the Chairman that the resolution has been carried
          or carried unanimously or by a particular majority, or lost, or not carried by a
          particular majority, shall be final, and an entry to that effect in the minute
          book of the Company, shall be conclusive evidence of the fact without the
          necessity of proving the number or proportion of the votes recorded in favor or
          against such a resolution. Subject to any provision in this regard in the
          Companies Law, or in these Articles, all resolutions of the shareholders
          including without limitation with respect to a merger, a change of the
          Company’s name, modification or alterations of the Company’s share
          capital and the amendment of the Company’s Memorandum of Association in
          accordance with such resolution and the amendment or replacement of the
          Company’s Articles of Association shall be deemed adopted at a General
          Meeting at which a quorum is present if approved by a simple majority of the
          voting rights of the Company represented personally or by proxy and voting
          thereon. 


          



     	57.	
          If a secret ballot is duly demanded, it shall be taken in such manner as the
          Chairman directs, whether immediately or after an adjournment or in a postponed
          manner or otherwise, and the results of the ballot shall be deemed to be a
          resolution of the meeting wherein the secret ballot was demanded. Those
          requesting a secret ballot can withdraw their request at any time before the
          secret ballot is held. A secret ballot demanded on the election of a Chairman,
          or on a question of adjournment shall be taken forthwith. A secret ballot
          demanded on any other question shall be taken at such time as the Chairman of
          the meeting directs. A demand for a secret ballot shall not prevent the
          continuation of the meeting with respect to the transaction of any other
          business, except for the manner with respect to which the secret ballot was
          demanded. All demands or notices hereunder may be submitted by facsimile. 


          



VOTES OF SHAREHOLDERS 



	58.  	Subject
to and without derogating from the right or preference rights or           restrictions
existing at that time with respect to a certain class of shares           forming of the
capital of the Company, each shareholder present at a meeting,           personally or by
proxy, shall be entitled, whether at a vote by show of hands or           by secret
ballot, to one vote for each Ordinary Share held by him calculated,           with
respect to the Preferred Shares and Ordinary-Preferred Shares, on an
          as-converted basis, provided that no shareholder shall be permitted to vote any
          shares at a general meeting or appoint a proxy to vote therein except if he has
          paid all calls for payment prior to or on the day appointed for payment thereof
          and all monies due to the Company from him prior to or on the day appointed for
          payment thereof with respect to such shares. 






	59.  	In
the case of joint holders the vote of the senior who tenders a vote, whether           in
person or by proxy, shall be accepted to the exclusion of the votes of the
          other joint holders; and for the purpose of this article seniority shall be
          determined by the order in which the names stand in the register of
          shareholders. Joint holders of a share of which one of them is present at a
          meeting shall not vote by proxy. The appointment of a proxy to vote on behalf
of           a share held by joint holders shall be executed by the signature of the
senior           of the joint holders. 






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	60.  	PROXIES 






	 	(a) 	In
every vote a shareholder shall be entitled to vote either personally or by
          proxy. A proxy present at a meeting shall also be entitled to request a secret
          ballot. A proxy need not be a shareholder of the Company. 






	 	(b) 	A
shareholder of the Company that is a corporation or partnership shall be
          entitled by decision of its Board of Directors or by a decision of a person or
          other duly authorized body, to appoint a person who it shall deem fit to be its
          representative at every meeting of the Company. The representative, appointed
as           aforesaid, shall be entitled to perform on behalf of the corporation he
          represents all the powers that the corporation itself may use just as if it was
          a person. 






	61.	(a)	
A vote pursuant to an instruction appointing a proxy shall be valid
          notwithstanding the death of the appointor or the appointor becoming of unsound
          mind or the cancellation of the proxy or its expiration in accordance with any
          law, or the transfer of the shares with respect to which the proxy was given,
          unless a notice in writing was given of the death, becoming of unsound mind,
          cancellation or transfer and was received at the Office before the meeting took
          place. 






	 	(b) 	A
shareholder is entitled to vote by a separate proxy with respect to each share
          held by him provided that each proxy as aforesaid shall have a separate letter
          of appointment containing the serial number of the shares with respect to which
          the proxy is entitled to vote. If a specific share is included by the holder in
          more than one letter of appointment, that share shall not entitle any of the
          holders of such instrument to a vote. 






INSTRUMENT OF APPOINTMENT 



     	62.	
          A letter of appointment of a proxy or power of attorney or other certificate (if
          there shall be such) pursuant to which the appointee is acting, shall be in
          writing and such instrument or a copy thereof shall be deposited in the Office,
          or in another place in Israel or abroad – as the Board shall direct from
          time to time generally or with respect to a particular case, no later than upon
          the commencement of the meeting or adjourned meeting wherein the person referred
          to in the instrument is appointed to vote, otherwise that person shall not be
          entitled to vote that share. An instrument appointing a proxy and which is not
          limited in time or by the occurrence of an event (such as an IPO) shall not be
          valid 12 months after the date of its execution. If the appointment shall be for
          a limited period or until the occurrence of an event (such as an IPO), the
          instrument shall be valid for the period or until the occurrence of the event
          contained therein. 


          



     	63.	
          An instrument appointing a proxy (whether for a specific meeting or otherwise)
          may be in the following form or in any other similar form which the
          circumstances shall permit: 


          



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“I,______________, of
______________, a shareholder holding shares in ____________ and entitled to _______
votes hereby appoint ________________, of ____________, or in his place ______________,
of _______________, to vote in my name and in my place at the general meeting (annual,
special, adjourned – as the case may be) of the Company to be held on the ____ day
of __________, 2___ and at any adjournment thereof.  



In witness whereof, I have hereby
affixed my signature the ___ day of __________, 2___. 





	——————————————


Appointor's Signature		








	64.  	RESERVED 






	65.  	DIRECTORS 






	 	(a) 	The
Board of Directors shall consist of up to nine (9) members who shall be
          appointed as follows: 






	 	(1) 	the
Founders shall be entitled to appoint one (1) director until such time as
               the Founders, together, cease to hold 7% or more of the issued and
outstanding                share capital of the Company on an as-converted basis, after
which they will no                longer have the right to appoint a director. However,
notwithstanding the                previous sentence, during the 18 month period
commencing upon the closing of the                Poalim Agreement, such right to appoint
one director shall continue to apply                even if their aggregate holdings fall
below 7% as aforesaid, until such time as                the Founders, together, cease to
hold 5% or more of the issued and outstanding                share capital of the Company
on an as-converted basis after which they will no                longer have the right to
appoint a director. In the event the Founders will no                longer be entitled
to appoint a director, the directorship which is vacated                shall thereafter
be held by another independent industry expert to be appointed                by a
majority of the other directors appointed pursuant to Articles 65(a)(2)-(3)
               below, such that two directors who are independent industry experts may
               thereafter serve on the Board of Directors;  






	 	(2) 	each
of Pitango, Star, Genesis and Orbotech shall be entitled to appoint one (1)
               director to the Board of Directors of the Company for so long as it holds
               Preferred Shares constituting more than 5% of the issued and outstanding
share                capital of the Company, on an as converted basis, and thereafter the
               directorship which was vacated shall be held by a director appointed by
the                holders of the majority of the Series AA Preferred Shares not
otherwise entitled                to appoint a director pursuant to this Article
65(a)(2);  






	 	(3) 	each
of Poalim Ventures and Wellington shall be entitled to appoint one (1)
               director for so long as it holds Preferred Shares constituting more than
3% of                the issued and outstanding share capital of the Company, on an as
converted                basis and thereafter the directorship which was vacated shall be
held by a                director appointed by the holders of the majority of the Series
BB Preferred                Shares;  






- 37 -








	 	(4) 	the
majority of the other directors appointed pursuant to Articles 65(a)(1)-(3)
               above shall be entitled to appoint one (1) director, who shall be an
independent                industry expert; and  






	 	(5) 	the
Chief Executive Officer (“CEO”) of the Company shall be a
               director if he or she is appointed as a director by a majority of the
directors                appointed pursuant to Articles 65(a)(1)-( 3) above;  






	 	(c) 	Observers
to the Board of Directors shall be entitled to attend all Board of           Directors
meetings and in this capacity, to receive all notices of meetings and           any
documentation the Company provides to the Company’s directors before,
          during or after such meetings, subject to restrictions relating to
          attorney-client privilege, and shall be subject (other than an observer
          appointed by Intel) to the same fiduciary duties that apply to members of the
          Board of Directors. 






	 	(d) 	The
provisions of this Article 65 shall be in force until the QIPO. 






	66.  	(a)	
The directors and observers shall be appointed as set forth in           Article 65
and may be removed and vacancies filled by those entitled to           appoint, as
specified in Article 65. Notice of appointment or removal shall           become
effective on the date fixed in the notice of appointment or removal, or           upon
delivery thereof to the Company, whichever is later. For avoidance of           doubt, in
the event that a seat of the Board of Directors is vacated, and no one           is
entitled to replace such vacated seat, then such vacated seat shall remain
          vacant and the number of directors shall be reduced accordingly. 






	 	(b) 	If
the office of any member of the Board of Directors is vacated, the other
          members of the Board of Directors may act in every way and manner so long as
          their number does not fall below two, at least one of which was appointed by
the           holders of the Preferred Shares. If their number falls below two, or if
there           are only two directors but none of them were appointed by the holder of
the           Preferred Shares, they may act only in an emergency, for convening General
          Meetings and for providing written notice to those shareholders or groups of
          shareholders who are entitled to fill the vacancies, of such vacancies. In the
          event that within 10 days following mailing of such written notices the
          vacancies are not filled, the directors in office, whatever their number or by
          whom appointed, may act in every way and manner. 






	67. 	Subject
to the provisions of these Articles or to the provisions of an existing
          contract, the tenure of office or the director shall automatically be
          terminated: 






	 	(1) 	if
he becomes bankrupt; 






	 	(2) 	if
he is declared lunatic or becomes of unsound mind; 






	 	(3) 	if
he has resigned by an instrument in writing to the Company; 






	 	(4) 	if
he is removed from office pursuant to Articles 65 and 66 above; 






- 38 -







	 	(5) 	with
his death; 






	 	(6) 	if
he is the CEO, upon termination of his position as CEO (or earlier, if           removed
pursuant to Articles 65 and 66 above, as aforesaid); or 






	 	(7) 	if
a company, with its liquidation. 






	68.  	ALTERNATIVE
DIRECTOR 






	 	(a) 	Any
person who is qualified to be appointed as a Director may serve as a           substitute
director even if he is a member of the Board of Directors or a           substitute
Director, (hereinafter “substitute”). 






	 	(b) 	A
substitute shall have one vote. 






	 	(c) 	A
substitute shall have, subject to the provisions of the instrument by which he
          was appointed, all the powers and authorities that the director for which he is
          serving as director, has. 






	 	(d) 	The
provision of this Article with respect to the appointment of a director           shall
apply with respect to an appointment of a substitute. 






	 	(e) 	The
office of a substitute director shall be automatically vacated if his
          appointment is terminated by the director who appointed him in accordance with
          these regulations, or upon the occurrence of one of the events described in
          Articles (1), (2), (3), (5), (6) or (7) of Article 67 or, if the office of
          the member of the Board of Directors with respect to whom he serves as a
          substitute shall be vacated for any reason whatsoever. 






	 	(f) 	The
substitute director has the right to receive notice of convening of a Board           of
Directors meeting and may participate or vote at such meeting only if the
          director appointing said substitute is absent from said meeting. 






	69.  	REMUNERATION
OF DIRECTOR 






	 	
Members
of the Board of Directors, not being employees of the Company or professionals providing
special professional services for consideration to its members - shall not receive a
salary from funds of the Company unless the general meeting has so decided and in the
amount that the general meeting shall decide upon. The directors, and their substitutes,
shall be entitled to receive expenses, in an acceptable rate, for travel expenses, board
and lodging that have been expended for or during the performance of their duties as
directors, and including travel expenses to the Board meetings and return. If pursuant to
a decision of the Board, one of the directors shall perform services or tasks aside from
his regular duties as a director, whether as a result of his particular profession or by a
trip or stay abroad or otherwise, the Board may decide to pay him a preferred wage in
addition to his regular salary, and such a wage shall be paid by way of salary,
commission, participation in profits or otherwise and this wage shall be in addition to
his regular salary, if there shall be any, or will be in place thereof, as shall be
decided. 






- 39 -







	70.  	POWER
AND DUTIES 






	 	
The
management of the business of the Company shall be vested in the Board of Directors. They
shall be entitled to exercise all the powers and authorities that the Company has and to
perform in its name all the acts that it is entitled to do according to its memorandum of
association and/or Articles and/or the Companies Law except for those which are pursuant
to the Companies Law or the Articles vested in the general meeting of the Company, subject
to any provisions in the Companies Law or in these Articles or the regulations that the
Company shall adopt in its general meeting (insofar as they do not contradict the
Companies Law or these Articles). However any article adopted by the Company in its
general meeting shall not affect the legality of any prior act of the Board that would be
legal and valid, if not for such an article. 






	71.  	A
director shall not be required to hold qualifying shares. 






CONFLICT OF INTEREST 



     	72.	
          A director shall not be prohibited from fulfilling his rights and duties under
          these Articles or from entering into contracts with the Company whether as a
          seller, buyer or otherwise, and no such contract or arrangement which shall be
          made on behalf of the Company or in its name wherein the director is or will be
          an interested party, either directly or indirectly, shall be void provided,
          however that: 


          



	 	(a)	any
transaction between a director and the Company must be approved both by the
          Board of Directors and the Audit Committee of the Company, or, if no Audit
          Committee has been created, by the General Meeting; 






	 	(b)	the
interested director may not participate or vote at the Board of Directors at
          which approval is sought unless all other directors are interested directors,
          but shall be counted toward the quorum necessary for commencing deliberations
at           such meeting; and 






	 	(c)	the
interested director must, in addition to disclosing the substance of his
          interest in the transaction for which approval is sought, also disclose any
          material facts and documents relating thereto. The provisions of this article
          shall apply also to a substitute or alternate director, if it is appropriate. 






     	73.	
          A director may hold another paid position or function in the Company or in any
          other company that the Company is a shareholder of or that it has some other
          interest in, together with his position as a director (except an auditor) upon
          those conditions with respect to salary and other matters as decided by the
          Board. 


          



     	74.	
          FUNCTIONS OF THE DIRECTORS 


          



	 	
The
Board may meet in order to transact business, to adjourn its meetings or to organize them
otherwise as it shall deem fit and to determine the legal quorum necessary to conduct
business, provided that the quorum for a meeting of the Board of Directors shall consist
of at least a majority of the directors then in office. A director whose presence is
required for purposes of a quorum as aforesaid may by written notice to the Company waive
the requirement for his presence in order to constitute a quorum. If within half an hour
from the time appointed for the meeting a quorum is not present, the meeting shall stand
adjourned to the second business day following the day originally scheduled, and at such
adjourned meeting 4 directors shall constitute a quorum notwithstanding that a director
appointed by any specific shareholder or class of shareholders is not present. 






- 40 -







	75.  	CHAIRMAN 






	 	
The
Board may from time to time elect, by a simple majority, a Chairman, and decide the period
of time he shall hold such an office, and he shall preside at the meetings of the Board of
Directors. However, if such a Chairman is not elected or if he is not present at any
meeting, the Board may, by a simple majority, choose one of its members to serve as
Chairman of that meeting. 






	 	
The
Chairman shall have no rights or privileges other than those granted to directors and
shall not have a second of casting vote. 






MEETINGS 



     	76.	
          A member of the Board of Directors may at any time call a Board of
          Directors’ meeting, and the secretary shall be required on the request of
          such member to convene a Board of Directors’ meeting. 


          



	 	(a) 	Any
notice of a Board of Directors’ meeting can be given, in writing, or by
          fax or email provided that the notice is given seven (7) days before the time
          appointed for the meeting, unless all the members of the Board of Directors
          having received a shorter notice, shall agree to such a shorter notice,
          provided, however, that a four (4) days notice will be sufficient if the
          majority of the directors then in office agree to such shorter notice. 






	 	(b) 	Unless
otherwise provided by these Articles, all acts and determinations of the           Board
of Directors shall be determined by a simple majority of those attending           and
voting. 






	 	(c) 	Members
of the Board of Directors, or any committee designated by the Board of
          Directors, may participate in a meeting of the Board of Directors, or any
          committee, by means of conference telephone or similar communications equipment
          by means of which all persons participating in the meeting can hear each other,
          and such participation in a meeting shall constitute attendance in person at
the           meeting. 






	77.  	DELEGATION
OF POWER 






	 	(a) 	Subject
to applicable law, the Board of Directors may delegate any of their           powers to
committees consisting of such member or members of their body as they           deem fit
and may, from time to time, revoke such delegation. No committee of the           Board
of Directors shall be established except by unanimous consent of all           directors. 






	 	(b) 	In
the exercise of any power delegated to it by the Board of Directors all
          committees shall conform to any regulations that may be imposed upon them by
the           Board of Directors, if there shall be any such regulation. If no such
          regulations are adopted by the Board of Directors or if there are no complete
          and encompassing regulations, the committees shall act pursuant to these
          Articles dealing with organization of meetings, meetings and functions of the
          Board of Directors, mutatis mutandis, and insofar as no provision of the Board
          of Directors shall replace it pursuant to this article. 







- 41 -







	 	(c) 	All
actions performed in a bona fide fashion by the Board of Directors or by a
          committee of the Board of Directors, or by any person acting as a director or
as           a substitute shall be as valid, even if at a later date a flaw shall be
          discovered in the appointment of such a director or such a person acting as
          aforesaid, or that all or some of them were unfit as if each and every one of
          those persons shall have been duly appointed and fit to serve as a director or
          substitute as the case may be. 






	80.  	GENERAL
MANAGER 






	 	(a) 	The
Board may from time to time appoint one or more persons, whether or not he           is a
member of the Board of Directors, as the CEO of the Company, either for a           fixed
period of time or without limiting the time that he or they will stay in
          office, and the Board may from time to time (subject to any provision in any
          contract between him or them and the Company) release him or them from their
          office and appoint another or others in his or their place. 






	 	(b) 	The
Board of Directors may from time to time grant and bestow upon the general
          manager, at that time, those powers and authorities that it exercises pursuant
          to these Articles, as it shall deem fit, and may grant those powers and
          authorities for such period, and to be exercised for such objectives and
          purposes and in such time and conditions, and on such restrictions, as it shall
          decide; and it may grant such authorities whether concurrently with the Board
of           Directors’ authorities in that area, or in excess of them, or in place
          thereof or any one of them, and it can from time to time revoke, repeal, or
          change any one or all of those authorities. 






	 	(c) 	Notwithstanding
the aforesaid in Article 69 the wages of the general manager           shall be
determined from time to time by the Board of Directors (subject to any
          provision in any contract between him and the Company) and it may be paid by
way           of a fixed salary or commission or dividends, or a percentage of profits or
the           Company profit turnover or of any other Company that the Company has an
interest           in, or by participation in such profits, or in one or more of the
aforementioned           methods. 






	81.  	MINUTES 






	 	(a) 	The
Board shall cause minutes to be taken of all general meetings of the           Company,
of the appointments of officials of the Company, of Board of           Directors’ meetings
and of committee meetings that shall include the           following items, if
applicable: 






	 	(1) 	the
names of the members present;  






	 	(2) 	the
matters discussed at the meeting;  






	 	(3) 	the
results of the vote;  






	 	(4) 	resolutions
adopted at the meeting;  






	 	(5) 	directives
given by the meeting to the committees;  






- 42 -







	 	(6) 	if
requested, any reservation of a shareholder or director with regard to a           matter
discussed or resolution passed.  






	 	(b) 	The
minutes of any meeting shall serve as prima facie proof as to the facts in           the
minutes if the minutes are reviewed and approved at the next succeeding           meeting
and are signed by the Chairman of that next succeeding meeting. 






	82.  	RESOLUTION
IN WRITING 






	 	
A
resolution in writing signed by all shareholders of the Company or by all the members of
the Board of Directors, or of a committee, or such a resolution that all the shareholders
of the Company then entitled to vote at General Meetings, the members of the Board of
Directors or a committee have agreed to in writing or by fax shall be valid for every
purpose as a resolution adopted at a General Meeting, Board of Directors’ or
committee meeting, as the case may be, that was duly convened and held. In place of a
shareholder or director, as the case may be, any such aforesaid resolution may be signed
and delivered by his substitute. 






	83.  	SEAL,
STAMP AND SIGNATURES 






	 	(a) 	The
Board shall cause the seal (if the Company shall have a seal) to be kept in
          safekeeping and it shall be forbidden to use the seal unless prior permission
of           the Board of Directors is given. If such permission was given, the seal
shall be           affixed in the presence of whoever has been so appointed by the Board
of           Directors, and he shall sign any document upon which the seal has been
affixed. 






	 	(b) 	The
Company shall have at least one rubber stamp. The Board shall ensure that           such
a stamp is kept in a safe place. 






	 	(c) 	The
Board of Directors may designate and authorize any person or persons (even           if
they are not members of the Board of Directors) to act and to sign in the           name
of the Company, and the acts and signatures of such a person or persons           shall
bind the Company, insofar as such persons have acted and signed within the
          limits of their aforesaid authority. 






	 	(d) 	The
printing of the name of the Company by a typewriter or by hand next to the
          signatures of the authorized signatories of the Company, pursuant to
sub-article           (c) above, shall be valid as if the rubber stamp of the Company was
affixed. 






	84.  	BRANCH
REGISTERS 






	 	
The
Company may, subject to the provisions of the Companies Law or any other applicable law
that may substitute such provisions, keep in every other country where those provisions
shall apply, a register or registers of shareholders living in that other country as
aforesaid, and to exercise any other powers referred to in the laws with respect to such
branch registers. 






	85.  	THE
SECRETARY, OFFICERS AND ATTORNEYS 






	 	(a) 	The
Board of Directors may appoint a secretary of the Company upon the           conditions
that it deems fit. The Board may as well, from time to time, appoint           an
associate secretary who shall be deemed to be the secretary for the period of
          his appointment. 






- 43 -







	 	(b) 	The
Board of Directors may, from time to time appoint to the Company, officers,
          workers, agents and functionaries to permanent, temporary or special positions,
          as it shall, from time to time, see fit and set compensation for them. 






	 	(c) 	The
Board may, at any time and from time to time, authorize any Company, firm,
          person or group of people, whether this authorization is done by the Board
          directly or indirectly, to be the attorneys in fact of the Company for those
          purposes and with those powers and discretion which shall not exceed those
          conferred upon the Board of Directors or that the Board of Directors can
          exercise pursuant to these Articles – and for such a period of time and
          upon such conditions as the Board deems proper, and every such authorization
may           contain such directives as the Board of Directors deems proper for the
          protection and benefit of the persons dealing with such attorneys. 






	86.  	DIVIDEND 






	 	
Subject
to the provisions of the Companies Law and these Articles, including without limitation
the provisions of Articles 7, 8 and 12 and subject to any rights or conditions of
Preferred Shares and Ordinary-Preferred Shares and other rights and conditions attached at
that time to any share in the capital of the Company granting preferential, special or
deferred rights or not granting any rights with respect to dividends, the profits of the
Company shall be distributable to the shareholders of the Company according to the
proportion of the nominal value paid up or credited as paid up on account of the shares
held by them at the date so appointed by the Company, without regard to the premium paid
in excess of the nominal value. A distribution, setting aside or declaration of dividend
requires a decision of the Board of Directors. 






	 	
The
Board of Directors may issue any share upon the condition that a dividend shall be paid at
a certain date or that a portion of the declared dividend for a certain period shall be
paid, or that the period for which a dividend shall be paid shall commence at a certain
date, or a similar condition, all as decided by the Board of Directors. In every such case
– subject to the provision mentioned in the beginning of this article – the
dividend shall be paid in respect of such a share in accordance with such a condition. 






	87.  	Subject
to the provisions of the Companies Law, at the time of declaration of a
                    dividend the Board of Directors may decide that such a dividend shall
be paid in                     part or in whole, by way of distribution of certain
properties, especially by                     way of distribution of fully paid up shares
or debentures or debenture stock of                     the Company, or by way of
distribution of fully paid up shares or debentures or                     debenture stock
of any other Company or in one or more of the aforesaid ways.                     For
purposes of any such distribution, the outstanding Preferred Shares and
                    Ordinary-Preferred Shares shall be deemed to have been converted into
Ordinary                     Shares as of the time appointed by the Board of Directors
for the purpose of                     determining entitlement to participate in such
distribution. 






	88.  	Any
dividends payable on shares which are not fully paid up, will be first
                    applied to any unpaid amount on such shares even if such payments are
not yet                     due, pursuant to the terms of issuance or as provided in
these Articles, and any                     excess will be distributed to the holder of
such shares as set forth herein. 






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	89.  	The
Board of Directors may put a lien on any dividend on which the Company has a
                    charge, and it may use it to pay any debts, obligations or
commitments with                     respect to which the charge exists. 






	90.  	A
transfer of shares shall not transfer the right to a dividend which has been
                    declared after the transfer but before the registration of the
transfer. The                     person registered in the register as a shareholder on
the date appointed by the                     company for that purpose shall be the one
entitled to receive a dividend. 






	91.  	Reserved. 






	92.  	A
notice of the declaration of a dividend, whether an interim dividend or
                    otherwise, shall be given to the shareholders registered in the
register, in the                     manner provided for in these Articles. 






	93.  	If
no other provision is given, the dividend may be paid by check or payment
                    order to be mailed to the registered address of a shareholder or
person entitled                     thereto in the register or, in the case of registered
joint owners, to the                     addresses of one of the joint owners as
registered in the register. Every such                     check shall be made out to the
person it is sent to. The receipt of the person                     who, on the date of
declaration of dividend, is registered as the holder of any                     share or,
in the case of joint holders, of one of the joint holders, shall serve
                    as a release with respect to payments made in connection with that
share. 






	94.  	(a)	
Subject to Article 12 above, if at any time the share capital shall be
                    divided into different classes of shares, the distribution of fully
paid up                     shares, from funds pursuant to Article 95 below, shall be
made in one of the two                     following manners as to be decided upon by the
Board: 






	 	(i) 	In
such a manner so that all the holders of a share entitled to fully paid up
          shares shall receive one uniform class of shares; or  






	 	(ii) 	In
such manner so that each holder of shares entitled to fully paid up shares as aforesaid
shall receive shares of the class of shares held by him and entitling him to fully paid
up shares, as aforesaid.  






	 	(b) 	In
order to give effect to any resolution in connection with the distribution of
                    dividends, or distribution of property, fully paid-up shares or
debentures, the                     Board of Directors may resolve any difficulty that
shall arise with distribution                     as it shall deem necessary, especially
to issue certificates for fractional                     shares and to determine the
value of certain property for purposes of                     distribution, and to decide
that payment in cash shall be made to the                     shareholder on the basis of
the value decided for that purpose, or that                     fractions the value of
which is less than one New Israeli Shekel shall not be                     taken into
account for the purpose of coordinating the rights of all the
                    parties. The Board of Directors shall be permitted, in this regard,
to grant                     cash or property to trustees in escrow for the benefit of
persons entitled                     thereto, as the Board shall see beneficial. Wherever
required, an agreement                     shall be submitted to the registrar of
companies and the Board may appoint a                     person to execute such an
agreement in the name of the persons entitled to a                     dividend,
property, fully paid up shares or debentures as shares or debentures
                    as aforesaid, and such an appointment shall be valid. 






- 45 -







	 	(c) 	The
Company shall not be obligated to pay interest on a dividend. 






	 	(d) 	The
Board of Directors may, with respect to all dividends not collected within
                    one year after their declaration, invest or use them in another way
for the                     benefit of the Company, until they shall be demanded. The
Company shall not pay                     interest for dividends or interest not
collected. 






	95.  	FUNDS 






	 	
The
Board may set aside from the profits of the Company the sums it deems proper, as a reserve
fund or reserve funds for extraordinary uses, or for preferred dividends or equalization
of dividends or other funds or for the purpose of correcting, bettering or retaining any
property of the Company and for those other purposes which shall, in the absolute
discretion of the Board of Directors, be beneficial to the Company and it may invest the
various sums so invested in such investments as it finds proper, and from time to time
deal with such investments, change or transfer them, in part or in whole, for the benefit
of the Company. The Board of Directors may, as well, divide any reserve liability fund to
preferred funds as it shall deem proper, transfer moneys from fund to fund and use every
fund or any part thereof in the business of the Company, without being required to keep
such sums separate from the rest of the Company’s property. The Board of Directors
may, from time to time, also transfer, to the next year, profits out of such sums which
are, in its absolute discretion, beneficial to the Company. Generally the Board of
Directors may create funds as it deems necessary, either those resulting from profits of
the Company or from re-evaluation of property, or from premiums paid for shares or from
any other source, and to use them in its discretion as it deems fit insofar as that in the
creation of such funds, the changes or uses do not exceed the provisions of the Companies
Law or accepted accounting principles. 






	96. 	All
premiums received from the issue of shares shall be capital funds and they
          shall be treated for every purpose as capital and not as profits distributable
          as dividends. The Board of Directors may organize a reserve capital liability
          account and transfer, from time to time, all such premiums to the reserve
          capital liability account or use such premiums and monies to cover depreciation
          or doubtful loss. All losses from sale of investments or other property of the
          Company shall be debited from other funds of the Company. The Board of
Directors           may use any monies credited to the capital reserve liability account
in any           manner that these Articles or the Companies Law permits. 






	97. 	Any
amounts transferred and credited to the account of income and expense fund           or
general reserve liability account or capital liability reserve account, may,
          until otherwise used in accordance with these Articles, be invested together
          with such other monies of the Company in the day to day business of the
Company,           without having to differentiate between these investments and the
investment of           the monies of the Company. 






	98. 	ACCOUNTS
AND AUDIT 






	 	
The
Board shall cause correct accounts to be kept:  






	 	(a) 	of
the assets and liabilities; 






- 46 -







	 	(b) 	of
any amount of money received or expended by the Company and the mattes for
          which such sum of money is expended or received; and 






	 	(c) 	of
all purchases and sales made by the Company. 






	99. 	The
account books shall be kept in the Office or at such other place as the           Board
deems fit and they shall also be open for inspection by the directors. 






	100. 	The
Board of Directors shall determine from time to time, in any specific case           or
type of case, or generally, whether and to what extent and at what times and
          places and under what conditions or regulations the accounts and books of the
          Company, or any of them, shall be open for inspection by the shareholders, and
          no shareholder, not being a director, shall have any right of inspecting any
          account book or document of the Company except as conferred by law or
authorized           by the Board of Directors or by the Company in a general meeting. 






	101. 	Not
less than once a year, the Board shall submit before the Company at the           Annual
General Meeting a profit and loss account for the period after the           previous
account, and if it is the first account for the period after           registration of
the Company, it shall be prepared as of a date not more than           nine months before
the date of the meeting and in accordance with the relevant           provisions of the
Companies Law, and the Board shall submit a balance sheet that           is correct as of
the date of the profit and loss account. To the balance sheet           shall be attached
a report of the auditor and it shall be accompanied by a           report from the Board
with respect to the situation of the Company business and           the amount they
propose as a dividend and the amount (if any) that they propose           be set aside
for the fund accounts. 






	102. 	Auditors
shall be appointed and their function shall be set out in accordance           with the
Companies Law. 






NOTICES 



     	102.	
          A notice or any other document may be served by the Company upon any shareholder
          either personally or by sending it by prepaid letter, fax or e-mail addressed to
          such shareholder at his address, wherever situated, as appearing in the register
          of shareholders, provided, however that a shareholder may notify the Company in
          writing of its objection to the use of e-mail as the sole means of notice in
          which event the Company shall provide notice to such shareholder by e-mail and
          one of the other means permitted by this Article 102. 


          



     	103.	
          All notices directed to be given to the shareholders shall, with respect to any
          shares to which persons are jointly entitled, be given to one of the joint
          holders, and any notice so given shall be sufficient notice to the holders of
          such share. 


          



     	104.	
          Prior and timely notice of the convening of a shareholders meeting shall be
          given to each shareholder, wherever situated, at the last address provided by
          the shareholder. Any shareholder registered in the register who shall, from time
          to time, furnish the Company with an address at which notices may be served,
          shall be entitled to receive all notices he is entitled to receive according to
          these Articles at that address. 


          



     	105.	
          A notice may be given by the Company to the persons entitled to a share in
          consequence of the death or bankruptcy of a shareholder by sending it through
          the post in a prepaid letter or fax or e-mail addressed to them by name, at the
          address furnished for the purpose by the persons claiming to be so entitled or,
          until such an address has been so furnished, by giving the notice in any manner
          in which the same might have been given if the death or bankruptcy had not
          occurred. 


          



- 47 -







     	106.	
          Any notice or other document, (i) if delivered personally, shall be deemed to
          have been served upon delivery, (ii) if sent by post, shall be deemed to have
          been served five (5) days after the time when the letter was delivered to the
          post, if sent by airmail, and two (2) days after the letter was delivered to the
          post, if sent by domestic post, and (iii) if sent by facsimile or electronic
          mail, shall be confirmed by appropriate answer back and shall be effective upon
          actual receipt if received during the recipient’s normal business hours, or
          beginning the recipient’s next business day after receipt if not received
          during recipient’s normal business hours. In proving such service it shall
          be sufficient to prove that the letter, facsimile, or electronic mail containing
          the notice was properly addressed and delivered at the post office or sent by
          facsimile or electronic mail, as the case may be. Any list kept in the ordinary
          manner in any mail list of the company or any copy of any fax in the
          Company’s possession shall be prima facie proof of the delivery. 


          



     	107.	(a)  	
          In any case where it is necessary to give prior notice of a certain number
          of days or a notice valid for a certain period, the date of delivery shall be
          taken into account in the number of days or period. 


          



	 	(b) 	In
addition to the furnishing of a notice pursuant to the above article, the
                    Company may furnish a notice to the shareholders entitled to receive
notice, or                     to part of them, by publication of a notice in a newspaper
distributed in the                     area wherein the Office is located, or any other
place, in Israel or abroad, as                     the Board shall determine from time to
time. 






	108. 	RESERVED 






	109. 	INDEMNITY 






	 	(a)	The
Company shall, subject and pursuant to the provisions of the Companies Law,
          indemnify an “Office Holder” of the Company (as such term is
          defined in the Companies Law) for all liabilities and expenses incurred by him
          arising from or as a result of any act (or omission) carried out by him as an
          Office Holder of the Company and which is indemnifiable pursuant to the
          Companies Law, to the maximum extent permitted by law. The Company may
indemnify           an Office Holder post-factum and may also undertake to indemnify an
Office           Holder in advance, provided that, to the extent required under
applicable law,           such undertaking is limited to types of occurrences which, in
the opinion of the           Board of Directors are, at the time of the undertaking,
foreseeable and to an           amount of the Board of Directors has determined is
reasonable in the           circumstances. 






	 	(b)	The
Company shall, subject and pursuant to the provisions of the Companies Law,
          enter into contracts to insure the liability of Office Holders of the Company
          for any liabilities incurred by him arising from or as a result of any act (or
          omission) carried out by him as an Office Holder of the Company and for which
          the Company may insure Office Holders pursuant to the Companies Law, to the
          maximum extent permitted by law. 






- 48 -







	 	(c)	The
Company may, subject to the provisions of the Companies Law, procure           insurance
for or indemnify any person who is not an Office Holder including,           without
limitation, any employee, agent, consultant or contractor of the Company           who is
not an Office Holder. 






	 	(d)	The
Company may, to the maximum extent permitted by law, exempt and release an
          Office Holder, including in advance, from all or part of his or her liability
          for monetary or other damages due to, arising or resulting from, a breach of
his           or her duty of care to the Company. The Directors of the Company are
released           and exempt from all liability as aforesaid to the maximum extent
permitted by           law with respect to any such breach, which has been or may be
committed. 






- 49 -








Exhibit B  



FIRST
AMENDMENT TO SHAREHOLDERS RIGHTS AGREEMENT  



This amendment (the
“Amendment”) dated March 22, 2006, to the Shareholders Rights Agreement
(the “SRA”) dated September 13, 2005, by and among Negevtech Ltd. (the
“Company”), the Founders (as defined in the SRA), the Prior Investors (as
defined in the SRA), the New Investors (as defined in the SRA) and Wellington Partners
Ventures III Technology Fund, L.P. (“Wellington”).  



	WHEREAS  	The
Company,  the  Founders,  the Prior  Investors and the New Investors are parties
                  to the SRA;







	WHEREAS  	Pursuant
to the Series BB Share Purchase Agreement of even date hereof, Wellington and certain of
the Prior Investors and the New Investors are purchasing Series BB-3 Preferred Shares of
the Company; 






	WHEREAS  	the
parties hereto wish to amend the SRA in order to include Wellington in the definition of
New Investor and to include the Series BB-3 Preferred Shares in the definition of
Registrable Securities, all as defined and provided for in this Amendment. 






NOW, THEREFORE, the parties hereto
agree as follows: 





	1. 	Schedule
B annexed to the SRA is hereby amended by the addition thereto of the           following
entity which, for the purpose of the SRA, shall be considered as one           of the New
Investors: 








	Investor 	Address 
	         Wellington Partners Ventures III
        
 Technology Fund, L.P.
	c/o Aztec Financial Services Limited

PO Box 730

32 Commercial Street

St Helier

Jersey

JE4 0QH












	2. 	The
Series BB-3 Preferred Shares being issued pursuant to the Series BB Share
          Purchase Agreement of even date hereof, will be included in the term
Registrable           Securities. Accordingly, the definition of the term “Preferred
BB           Shares” in Section 1.11 of the SRA is hereby deleted in its entirety
and           replaced with the following: 






	 	
“1.11
The term “Preferred BB Shares” shall mean Series BB-1 Preferred Shares of the
Company, Series BB-2 Preferred Shares of the Company and Series BB-3 Preferred Shares of
the Company, par value NIS 0.01 each.” 






	3. 	Except
as expressly provided in this Amendment, the SRA and each of the           provisions
contained therein shall remain in full force and effect. 













[1st Signature page to First Amendment to Shareholder Rights Agreement] 




IN WITNESS WHEREOF, the
Parties hereto have caused this Amendment to be executed by their duly authorized
representatives, on the dates set forth below: 


			
			
			
			
			
	
	
	

	Intel Atlantic, Inc.	Pitango Venture Capital Fund III	Pitango Venture Capital Fund
	 	(Israeli Sub) L.P.	III (Israeli Sub.) Non-Q L.P.
	 
	
	
	

	Pitango Venture Capital Fund III	Pitango Principles Fund III	Pitango Venture Capital Fund
	(Israeli Investors) L.P.	(Israel) L.P.	III Trusts 2000 Ltd.
	 
	
	
	

	Pitango JP Morgan Fund III	Qualitau Ltd.	Shrem Fudim Kelner Founders
	(Israel), L.P.	 	Group II L.P.
	 
	
	
	

	Shrem Fudim Kelner & Co. Ltd.	Canada Israel Opportunity Fund	SVE Star Ventures Enterprises
	 	III, L.P.	Gmbh & Co. No. IX KG
	 
	
	
	

	Star Management of Investments No.	Star Growth Enterprise, a German	SVM Star Ventures
	II (2000) L.P.	Civil Law Partnership (with	Managementgesellschaft mbH Nr. 3
	 	limitation of liability)
	 
	
	
	

	Orbotech Technology Ventures L.P.	Lehman Brothers European Venture	Lehman Brothers Holdings PLC
	 	Capital L.P.	(on behalf of pre-tax plan)
	 
	
	
	

	Lehman Brothers Partnership	Lehman Brothers Offshore	Poalim Ventures Ltd.
	Account 2000/2001, L.P.	Partnership Account 2000/2001,
	 	L.P.
	 
	
	

	Poalim Ventures I Ltd.	Poalim Ventures II L.P.














[2nd Signature page to First Amendment to Shareholder Rights Agreement] 




			
			
			
			
			
	
	
	

	Genesis Partners II L.D.C.	Genesis Partners II (Israel) L.P.	Plenus Technologies Ltd.
	 
	
	
	

	Gadi Neumann	David Alumot	Wellington Partners Ventures
	 	 	III Technology Fund, L.P.
	 
	

	Negevtech Ltd.